An industry-wide error in relation to property transfers into SIPPs and SSASs has been uncovered by Cornerstone Tax, which means that over 120,000 people may be owed compensation of up to £80,000 each.
The error – whereby solicitors acting in such transfers assume that Stamp Duty Land Tax (SDLT) must be paid on the transfer of property from multiple owners into SIPPs or SSASs – has been confirmed with HMRC by Cornerstone Tax, who have already won several test case refunds for their clients and have received pre-transaction “legal” clearance from HMRC. Given the comprehensive nature of this misunderstanding across the industry, Cornerstone calculates that the compensation due from HRMC and solicitors to pension holders affected could amount to nearly £10 billion in total.
Cornerstone first identified the problem in early 2019 and approached several members of the pensions industry with their concerns. Advance clearance was also sought from HMRC and was obtained; this confirmed pensions that acquired trade properties from joint owners or owner-managed companies since 2007, which have paid SDLT on these contributions in specie or sales to pension schemes, should not have paid SDLT.
The error means that not only did clients lose capital from their pensions in the initial SDLT payment, but also lost the potential to invest that capital, thereby losing any potential growth in the ensuing years. For the average error the value of the claim is therefore calculated at 150% of the tax paid incorrectly (assuming 7% ROI).
David Hannah – principal consultant at Cornerstone Tax – said: “We have spent the last year or so working on researching this issue. The scale of it and the industry reluctance to even acknowledge that there is a problem has been staggering. We have contacted over 50 of the top pension providers, accountants and IFAs in the country and thus far have not received a single correct response, highlighting the prevalence of ignorance to this issue in the industry.
Given the fact that we have a pre-transaction clearance and refunds from HMRC on 2 cases it leads me to believe that tax advisors, accountants, and solicitors simply aren’t doing what needs to be done when presented with this particular question and scenario. They are in fact operating on a series of assumptions and almost “reflexes” which cause them to see the words cash/selling in the question and because it would be common sense to assume that tax is due, they are simply reaching for the obvious answer.”
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