We’re being SLAPPed by tax avoidance outfit “Property118”
We said their landlord tax avoidance scheme didn’t work and, worse, could default your mortgage. Their lawyers have ordered us to retract our opinion, because they’ve paid for a secret KC opinion which we must defer to, but can’t publish.
Our opinion is widely shared within the legal and tax professions, and we won’t be retracting it. We’re publishing the SLAPP and our response. The KC opinion turns out to be largely irrelevant – we’re publishing it, together with our analysis.
Our original report on the Property118 scheme is here, and a shorter piece on their “amazing” bridge loan scheme is here.
UPDATE 16 October: it looks like there will be no sequel to this article, as Property118 and their libel lawyers parted ways soon after it was written. We can only speculate as to why.
The KC opinion
Property118 say the KC opinion “confirms the correctness of their approach”:
Although you’re not allowed to see a copy:
So it’s not a complete surprise that the opinion does not in fact “confirm the correctness of their approach”. It doesn’t even discuss the biggest failings of the structure:
- No answer to the key question of whether the structure defaults the mortgage. We, every finance lawyer we’ve spoken to, and UK Finance – the mortgage lenders’ industry body – say it likely does. Property118 and their KC have no response. None.
- No consideration of whether the scheme should have been disclosed to HMRC under DOTAS. Our team, which includes the retired HMRC official who oversaw the introduction of DOTAS, says it should have been. Property118 and the KC have no response
- No discussion of anti-avoidance rules. The KC opinion summary doesn’t even contain the words “tax avoidance”.
- What kind of opinion on a tax avoidance scheme doesn’t consider tax avoidance rules and principles?
The KC has an excellent reputation, and it is inconceivable she missed these points – she was, presumably, instructed not to cover them.
On other key points: SDLT and inheritance tax, the KC provides no view – none. Again I assume those were her instructions.
And, even where the KC does provide a view, it isn’t clear she’s been properly briefed on the structure. We go through the KC summary opinion in detail here.
The tl;dr version
On the one hand, you’ve got me, the mortgage lenders themselves, the author of the leading textbook on stamp duty, the author of the leading textbooks on capital gains tax and income tax, and a former President of the Chartered Institute of Taxation (who, when a senior HMRC official, oversaw the introduction of DOTAS). Plus a dozen other specialists, ranging from KCs to retired HMRC inspectors. And all the professionals commenting on Twitter and LinkedIn, where opinion is virtually unanimous. Advisers have been making these points for years.
On the other hand you’ve got a bunch of people with no tax qualifications, who’ve paid for a KC opinion that misses all the important points and skates over the others.
And we’re supposed to believe not only that the unqualified people are correct, but that if you express a contrary opinion they’ll sue you for defamation.
Come off it.
Our response to the SLAPP
This is the full text of our response to the SLAPP. PDF version available here.
Brett Wilson LLP
35-37 St John’s Lane
London EC1M 4BJ
6 October 2023
Sent by email to xxxxxxx@BrettWilson.co.uk from xxxxxxx@taxpolicy.org.uk
Dear Sirs and Madams
Property118, Mark Smith and Cotswold Barristers
Thank you for your letter of 3 October 2023, claiming that our reports on your clients are highly defamatory, and asking us to retract them.
Your letter fails to identify a single specific statement we have made which is false, or with which you disagree.
Our reports aim to be accurate and complete, and we will always correct errors of fact or law as soon as they are pointed out to us. We have, therefore, reviewed your summary of the KC opinion. As we do not have the instructions, it is not clear on what facts and assumptions the opinion is based. I would, nevertheless, summarise our view (in light of that summary), as follows:
1. Your clients market a scheme on the basis that it is “fully compliant for mortgage lending purposes” and is “invisible to lenders unless you alert them”. Our view is that in most cases the Property118 scheme breaches the terms of its clients’ mortgages, likely leading to a mortgage default. That is our view, the view of every real estate finance specialist we spoke to, and the publicly stated view of UK Finance, the industry body for mortgage lenders.
It is hard to imagine a more serious problem for your clients than their scheme defaulting their clients’ mortgages. Yet your client refused to explain their position to me in correspondence, and the summary KC advice acknowledges that there is a potential breach, but provides no view on the point.
If this was the only problem with your client’s structure, it would be a disaster for their clients (which is why I described it as the “worst tax avoidance scheme ever”). This is, however, not the only problem.
2. Your clients market a scheme for which the main purpose and benefit include the obtaining of a tax advantage. The normal incorporation of a property rental business has many commercial advantages, not least legal segregation and protection from liabilities of the business. Your clients’ scheme has none of those advantages, because legal title, and hence all liabilities, remain with the landlord. Its main purpose, and perhaps its sole purpose, is gaining a tax advantage.
An arrangement where the main purposes and/or main benefits include gaining a tax advantage is subject to numerous anti-avoidance rules, and many people would refer to it as a “tax avoidance scheme”.
An important consequence is that your client’s scheme is likely disclosable to HMRC under DOTAS, and their failure to disclose could render them liable to a penalty of up to £1m. Another consequence is that your clients’ scheme cannot rely on HMRC guidance, concessions or clearances. Furthermore, no deduction is available under the loan relationships rules. Perhaps most seriously, it means that HMRC could have up to 20 years to challenge Property118’s clients and impose tax, interest and penalties.
(You mention the term “unlawful tax advantage” in your letter; this is not a term I have used, and it has no legal meaning.)
The summary KC advice does not express any view on these issues. I do not know why that is. An opinion on a tax avoidance scheme which doesn’t discuss anti-avoidance rules and principles is worthless.
3. Your clients claim that the Mr Smith carries professional liability insurance of £10m per client, meaning that his clients are “shielded from financial risk”. This is a misleading way to describe professional indemnity cover, which omits the minor detail that clients would need to bring a negligence claim against Mr Smith, and win.
We also understand from the experienced insurance lawyers and underwriters we have spoken to that Mr Smith’s insurance is mostly unlikely to provide £10m of cover “per client” – it will be £10m of cover “per claim”. This is a very significant distinction. The typical definition of “claim” means that, if Mr Smith has sold the same scheme to 1,000 clients, and each scheme fails for the same reason, then the cover “per claim” will actually be £10,000, not £10m.
It is our opinion that your clients are misleading their clients into thinking that insurance protects them from the risks their scheme creates. It does not.
4. Your clients claim that “HMRC has confirmed [our] strategy is perfectly above board”. HMRC do not provide confirmations of this kind. In our opinion, the claim is false.
5. We observe that Property118 has no staff with any tax qualifications. Indeed, Mr Alexander seemed unaware of the existence of the CTT and CTA qualifications. The only prior connection I can see between Mr Alexander and tax planning is that he was an investor in two failed film relief tax avoidance schemes.
Cotswold Barristers also has no staff with any tax qualifications. It is not a tax set; Mr Smith revealed (in a discussion on LinkedIn) he had not heard the term “tax set”. Mr Smith’s practice ranges from business law, to tax, to criminal defence work, to private prosecutions (including one where he was suspended by a month by the Bar Standards Board for acting negligently and “failing to act with reasonable competence”). Mr Smith’s profile on the Cotswold Barristers website in 2017 and 2020 did not include tax in his stated areas of practice.
In light of this, and the advice they have proffered, it is our opinion that Property118 and Cotswold Barristers are unqualified to advise on tax matters.
6. Your clients market an SDLT avoidance scheme for married couples who jointly own a property rental business. The scheme involves retrospectively claiming that the couple has always been a business partnership, and therefore that SDLT “partnership relief” is available. They do this even in cases where there was no partnership agreement, no partnership tax returns, and no extraneous evidence of any kind that a partnership existed. The one decided case on similar facts was thrown out.
It is our opinion that it will only be in rare cases that this strategy succeeds, and SDLT relief applies. We also expect HMRC to contest the availability of relief. The fundamental problem is that relations between a married couple are very different from relations between members of a business partnership. Furthermore, anti-avoidance legislation could potentially apply even if a partnership was found to retrospectively exist.
The KC correctly states the law in this area but provides no view on whether SDLT will be available – she says “This is a question of fact and we cannot comment more specifically at this stage”. The KC then provides no view on the anti-avoidance point. Again, I don’t know why that is.
7. Your clients claim that CGT incorporation relief applies on the establishment of their structure. Our opinion is that it does not, because the fact the company is becoming a beneficiary, without legal title – and will stay in that position for at least the term of the mortgage – means that the landlord’s original business did not in fact transfer to the company. An additional problem is that the HMRC concession on which your client’s scheme relies cannot be used for tax avoidance. There are then further questions about the impact on the CGT analysis of a sale that is in breach of a mortgage.
The KC states that incorporation relief applies but does not seem to appreciate the long-term nature of the trust. The KC does not address the avoidance point or the breach point. Once more, I don’t know why.
8. Your clients claimed that the company could claim a tax deduction for the mortgage interest, even though it is the landlord (not the company) who is the borrower under the mortgage. Our view is that this is probably not possible. The KC disagrees, but does not address our arguments around s330A CTA 2009, and does not consider the loan relationship anti-avoidance rules. I do not know why.
9. Your clients claimed that the company makes payments to the landlord to cover the landlord’s own interest payments, but the landlord wouldn’t be taxed on these payments. They were unable to explain why. We said in our report that either the landlord would be taxed (income treatment), or the company wouldn’t obtain a deduction (capital treatment): you can’t have your cake and eat it.
The KC’s view on this is not clear to me. It is possible she is a “cakeist”, and believes there can be a deduction on one side, without taxable income on the other, but that seems unlikely, and it is perhaps more likely that I am misunderstanding her position.
I should add that some of the law in this area is complex, particularly the interaction between the income/capital distinction, the annual payments rule (and the pure income profit test established in Conservators of Epping Forest), and the scope of the miscellaneous income rule (given the continuing relevance of the old 19th century Schedule D Case VI caselaw such as Attorney-General v Black).
This and point 8 are important, because Property118 rely on “cakeism” for their structure to work – they need the company to have a deduction, but the landlord to have no income tax. This is a very unlikely outcome. That means we expect Property118’s clients will end up in a worse position, on these two points alone, than if they hadn’t effected the structure at all.
10. Your clients marketed a scheme as an “amazing opportunity”. It involves the creation of a bridge loan for no purpose other than the obtaining of a tax advantage. In our view, the scheme fails for a variety of technical reasons, and is likely (again) disclosable under DOTAS. The KC thinks the scheme is acceptable, but the caselaw and HMRC guidance she refers to relate to a different type of transaction entirely. I do not know why that is.
11. Your clients market a scheme under which “growth” shares are created, entitling the holder to all the future growth of a company. Yet they argue these shares have no value. Our opinion is that they do have value. The KC declined to express a view on the valuation point. I do not know why.
It is our view that shares with a strong chance of upside, and zero chance of downside, will not have a value of zero. If your clients still disagree, please tell them that I would be interested in acquiring some of these shares, and I am prepared to pay well over the odds (up to £10, subject to contract).
12. You say in your letter we make the incorrect assumption that your clients give the same advice to all clients. We make no such assumption. We simply note that we have reviewed multiple copies of advice from your client recommending an essentially identical scheme, and viewed promotional material published by your clients reflecting that same scheme. If your clients believe we have inaccurately described any aspect of their scheme, or if they are currently marketing other schemes, then please let us know.
I would be grateful if you could let me know if there are any errors of fact or law in the above, and we will strive to correct them.
What we will not do, however, is change or retract our opinion because it is inconvenient to your clients. I say “our” opinion because, whilst I take sole responsibility for the content of Tax Policy Associates’ reports, they reflect the views of a large team of experienced tax advisers. This includes KCs, solicitors, tax accountants and retired HMRC officials. Most of those advisers cannot be named, for professional reasons, but you will note that those that we do name are some of the most eminent in their field, who literally “wrote the book” on the taxes in question. We believe that our views reflect that of the wider profession (and the comments on social media from other advisers reflect that).
We are committed to transparency and will publish this correspondence, an annotated copy of the KC opinion summary, and all further correspondence between us.
Your clients may wish to consider notifying their insurer.
Yours faithfully
Dan Neidle
Tax Policy Associates Ltd
43 responses to “SLAPPed by tax avoidance firm “Property118””
Dan, One thing I would add in relation to liability insurance – it does not cover the fees of the adviser. So Cotswold Barristers will not be able to claim on their insurance to cover claims for the refund of fees paid to them for this scheme. They will have to pay this back out of their own pocket.
thanks – it’s an important point because the the fees, individually and in aggregate, are likely very large.
Please can you explain to me why companies such as Grainger Plc, can deduct their interest costs in full, but small landlords cannot?
It is clear the Government only loves big companies, but hates small investors.
Individuals can’t deduct tax from any interest they pay, unless they’re carrying on an active trade. If I borrow to finance the purchase of shares, bonds, bitcoin, wine, property… I don’t get a tax deduction for interest. Real estate is slightly more favourable because of the 20% credit.
You are wrong Dan Neidle. You are anti landlord and you know s24 is illegal and unfair. Your long analysis deliberately omits facts of taxation law which allow incorporation – your article should balanced and truthful. You are obviously being manipulated by shelter or other organisation…. I am not a landlord but i cannot understand how an individual landlord cannot offset interest while any other business can. How you are to compare a landlord to bitcoin….etc…. go and educate yourself pls….
Please think about this again. Section 24 is not illegal – it is the law. Whether it is “fair” is a political question which is irrelevant to the legal issues discussed here. It is an extremely bad idea to plan your taxes based upon your political views.
There is nothing wrong with incorporating a property business (although it has to be done with care to avoid triggering unwanted tax results, and it will not always make sense financially). The question is whether the structure proposed by Property118 works. This article is about a legal threat I received from Property118 based upon a “KC opinion” which, it turned out, did not support their position. The consequence of my response was that the law firm involved ceased to act for Property118.
I’m happy to answer any questions you have, or respond to substantive criticisms. But I hope on reflection you realise it’s pretty childish to say I am “manipulated by Shelter”.
Mark section 24 is legal and it is responsible for this entire saga. The personal views and politics of you, me, Dan or anyone else are irrelevant. The intention of section 24 appears to be to make residential property less of an investment and thereby discourage unprofessional landlords.
Residential property became an “investment” with the introduction of the AST. Prior to that you could seldom have vacant possession and had to wait for people to move out of their own accord or die. I do know the history of it, and I wrote about it to my MP following the white paper in June 2022. He asked if he could circulate it and I said he could.
However, I digress. We must deal with the situation we have in front of us now. The tax changes are real and painful ipso facto there are many people seeking a solution. Whether you can avail yourself of the reliefs and benefits of incorporation is case dependant. I don’t think that is in dispute.
What is in dispute appears to be the method(s) surrounding the conveyancing of the portfolio and length of time that a declaration of trust is in place. Whether it be transitory as in making the conveyancing of multiple properties easy and simultaneous OR open ended.
Owning a property isn’t a business.
Property management is, but that is incidental to owning a property. You don’t get to deduct interest when buying shares or other assets so why property?
The P118 site now has FOUR separate articles on its main page about Dan and the ‘avoidance’ scheme. It’s a full on campaign that has now treaded into the realms of ‘there’s something sinister behind this’, with some of their evidence being posts taken down from an accounting webchat or something (the irony).
They are convinced HMRC are happy with their structure, and their reasoning is because people have put tax returns in after utilising the scheme and (so far) HMRC haven’t said anything about it. A number of the comments (prior to being taken down) asked P118 for absolute confirmation from HMRC that the SIS is acceptable, unfortunately, this has not been forthcoming.
P118 could make the whole issue moot IF they simply contact HMRC themselves, declare the full mechanics of what they have done, and then let HMRC decide if it’s acceptable or not. I wonder why they HAVEN’T done this??
This just arrived via email https://www.property118.com/dan-neidle/
it’s a very silly piece and I plan to respond to it!
Yesterday I attempted to post a comment on the P118 website, only to find, this morning, that my account had been disabled. It appears that they are actively blocking any comments that are in any way critical of them. That says it all for me as to the kind of organisation they are.
It seems Mark has now resorted to putting out ‘woe is me’ articles on his own website (P118) in an attempt to garner ‘sympathy’ from what appear to be cult members based on the responses.
One response states clearly that they have not read a single article from Dan specific to why Dan believes the P118 scheme fails, but that they are ‘happy to recommend’ P118’s incorporation ‘scheme’ to anyone because (at present), everything has gone swimmingly.
The article is titled ‘an open letter to Dan Niedle’, it’s worth a read just to see the comments from those who are evidently ‘hoping’ they don’t receive a response from HMRC.
I have a learnt a lot from your investigations and your on point, consensus building tax analysis. Thank you and please keep up the good work.
Who is to blame for this? It was George Osborne as chancellor, who changed taxation on small landlords. It was unfair taxation. This tax change was never mentioned in the Tory party manifesto. It was never debated. At the same time George Osborne gave tax breaks for REITs. Is it fair?.
George Osborne got the idea of this policy from the Green Party manifesto. They wanted tax increases on landlords. It was bewildering for the Greens to have this policy in their manifesto, why did n’t they have a policy of tax breaks for landlords who put solar panels?? We have a climate emergency!
Instead landlords wasted ££££s on accountants and tax advisers, rather then use the money on solar panels or improve the property. Landlords put rents up to cover the tax or use on unproductive uses such as tax advisors. Did it benefit tenants?
In Germany, there is no capital gains tax after 10 years of property ownership
It has become toxic to be a landlord, but the politicians did n’t give people dignified exit strategy for landlords.
Base rates at at 5.75%. People paying 8.5% interest on a property with a yield of 6%.
All it has done is make people loose confidence in this country. It tells me they can re-write tax laws at any time.
If I were a chancellor, I would be enticing landlords to sell up and invest the money in business. This would grow the economy. All the Government has done, is tell people don’t’ try to grow your money, because we will take it off you.
If people sell up they pay 28% capital gains tax. When they want to pass it on to the next generation that is another 40% tax. How does that motivate people?
I should like to summarise some saliant points.
How did landlords find themselves in this position? Obviously, it was the tax changes made by George Osborne. Nobody had any reason to explore these reliefs and incorporations prior to that. Necessity being the mother of invention is what motivated such exploration. The landscape is changing and millions (2.74 million landlords and just under 5 million properties from a quick Google search) are looking for answers.
Property118 are in a unique position because they have a track record of helping landlords facing difficulties. I am referring to the West Bromwich Building Society case.
I was not involved with that but I would imagine that most of the “experts” advised people to suck it up and pay. Property118 and Cotswold Barristers did not – they decided to fight and they won. The result was a liability of £27.m in refunds for borrowers. So, if the “experts” have been proven wrong before might they be wrong again?
Is there such a thing as a difference between legal and beneficial ownership? Well yes, but the question is can it be utilised in this instance?
Are there legitimate roll over GCT reliefs? Well yes, but the question ought to be does this person qualify?
I have worked in a solicitors (Davies Arnold & Cooper about 50 years ago). I know that a great deal of the work was carried out by legal executives and trainees. Even the girls in the typing pool if there was a lot to do. It was all overseen by a partner at the end so I am sure that nothing of great importance slipped through. The point I am making is that you don’t need the expert for the routine. You don’t need a surgeon to take someone’s blood pressure. It is important that the surgeon knows what the blood pressure is. Which is not at all the same as insisting that he take it.
All well and good but how do you explain the DLA “loan” with a “fake” bridge. You don’t need to be a tax expert to see this is tax avoidance.
How can you pay disproportionate dividends to share holders without triggering settlement.
How can the growth shares really be worth £0. Every time I as this on P118 website it just gets deleted, maybe you try asking since you already posted on his bully article.
I am sorry River I have only just seen your comment. Property118 sent this via email which mentions the loan https://www.property118.com/why-dan-neidle-is-wrong-about-tax-relief-for-finance-costs-and-capital-extraction/
I just think that this entire saga should be going on behind closed doors. It does not belong in public because it drags professionals down to the gutter. By all means bring suspicions to the attention of HMRC and let them mount enquires. If they find anything untoward they will take action.
HMRC can take years to investigate and resolve tax disputes. Normally the result is then confidential for the parties involved. So if I had remained silent, Property118 would have continued selling their duff scheme to landlords, and landlords would have unknowingly accrued liabilities, for years and years. I regard that as unacceptable.
As for the Property118 article, it is generic waffle which fails to respond specifically to our analysis. And our analysis is shared by leading experts in the field. Property118 have no expertise and no credibility.
Apparently you are now a bully……..
https://www.property118.com/what-its-like-dealing-with-dan-neidle/
I suppose it is progress from Zahawi that P118 are publishing the letters from their solicitors to Dan, rather than claiming that they are secret (has Dan changed standard practice already?)
Iain Wilson (or one of the other partners at Brett Wilson) seems to have learnt from Ashley Hurst to hide better behind his firm’s name, albeit that his is in it.
I find all the suggestions on LinkedIn that CIOT should police avoidance schemes amusing. It’s a “someone else’s job” attitude to absolve responsibility of the KCs, promoters etc not to push dodgy schemes. Plus how much members willing to pay the CIOT to do this?
About policing the firms involved in all of this, who is able to police it if not the Governing Bodies? Who else has the expertise and is aware of the subject matter? The problem is that landlords do not know who to trust. The Less tax for Landlords firm has all the right credentials and were even supported by the NRLA (National Residential Landlords Association) and yet they have a Spotlight from HMRC. Many landlords just leave the “paperwork” to their accountant – I bet plenty of people that are not landlords do the same thing.
Unless you have a reason and this latest set of revelations are reasons aplenty, you simply don’t concern yourself with what “the penpushers” get up to. So it has been highlighted thanks to Dan that there are both rogue operators and unregulated operators in this market. The explosion in the landlord incorporation market is very new because the changes to the tax legislation are very new.
So try to view this through the lens of the “passenger on the Clapham Omnibus” (that phrase was used by David Conlan in a recent comment on this issue). Where can they go? Which firms can they trust? The advice to “make sure you go to a person with all the right credentials” didn’t turn out too well did it? Then we have an unregulated firm who are beloved by landlords for the reasons outlined in my previous post. So far at least the score is:
“regulated and trustworthy advice” 0 v “unregulated and disastrous advice” 100s
Like everyone else am waiting with bated breath to see a response from HMRC.
Susan, that is a terrible idea. HMRC will take years. This is easy: go to a firm with qualified tax accountants or tax lawyers. Listen to what the vast majority of the profession are saying. If some advisers say a scheme is a disaster, then it is (at a minimum) a risk you should not be running.
It is interesting that Property 118 is trying to deflect attention from its own arrangements by attacking the hybrid partnership arrangements. This is obviously much easier than having to defend their own arrangements, which HMRC may well Spotlight in due course:
https://www.property118.com/spotlight-63-hmrc-and-property118-agree/
Thank you for the dedication and effort you have put into your work. Carry on doing the hard work and saving others from these “hybrid” models. I surely hope that ICAEW, STEP, SRA will be taking action against their members involved in these schemes. Surely if HMRC can fine Tax Avoidance Scheme promotors, these bodies should also take appropriate action.
Here’s a quote from Mark Alexander on the P118 site today:
‘It is disappointing that ‘Witch Hunts’ currently occurring in this sector are leveraged and conflated by rivals to imply that Property118 and Spotlight 63 are connected in any way, other than the fact that we have been warning landlords to beware of tax-abusive use of the Hybrid LLP structure since 2018.
My heartfelt sympathy goes to all those landlords who ignored or missed our warnings and fell for the “Hybrid LLP” sales pitch.’
Let’s hope his ‘heartfelt sympathies’ go out to all the portfolio Landlords he’s take £45k plus in ‘fees’ from when HMRC come back with a ‘computer says NO’ response.
Tick Tock
What about the smart company set up p118 promoted with freezer shares and a trust? Is there also a problem with that set up even if no properties were transferred into it?
“The KC has an excellent reputation, and it is inconceivable she missed these points – she was, presumably, instructed not to cover them.”
Given that the opinion refers to you by name, she must surely have read your first article, so she cannot be ignorant of the wider picture.
So why would she risk her reputation by agreeing to respond to what were apparently deeply flawed instructions?
I understand the need for even the worst criminals to have legal representation defending them, but in civil matters can barristers not decline to respond to instructions which don’t address the real issues?
P.S. Your experience of successfully seeing off the Zahawi SLAPP has clearly given you confidence in handling future ones!
I can just hear the claims companies rubbing their grubby hands together, there must be literally millions in the balance here, having considered taking up Mark Alexander and Property 118s scheme I feel that I have dodged a bullet but most certainly feel for the many many landlords who have paid tens of thousands into this scheme and who now must be immensely concerned over their futures, whats not clear to me is where do they go for help while this all unfolds?
As the Duke of Wellington once said, ‘Publish and be damned’
Well done Dan, taking down the quacks and the charlatans one letter at a time.
These amatuers don’t stand a chance.
Brilliant, clinical anaylsis as always.
Seasoned litigator here. Rather enjoying BW’s assertion that providing a detailed summary of legal advice doesn’t amount to a waiver of privilege! Particularly when it’s plastered all over the Internet.
I thought it was interesting that BW LLP had instructed Ms Cullen and that it had instructed her “independently of, and without any input from” its clients. As a tax person, that strikes me as unusual as I always discussed with my clients the choice of counsel. But it made me interested enought to read the rest of the letter.
As I’ve not come across BW LLP, I thought I’d see who they were and what type of tax work they specialised in. On its website, BW LLP describes itself as “specialist media and litigation solicitors” and I couldn’t immediately see that any of the 16 people on the website had any tax experience. I can see that they have a service of “tax investigations” but that seems to be about criminal investigations and tax fraud rather than advising on the underlying tax issues. The partner leading this area seems to be ciminal law and professional disciplinary partner, with no mention of tax on his bio.
So does this mean that people with no relevant tax experience or qualifications wrote the instructions? Could this be a reason why there is no mention of tax avoidance, DOTAS, etc? Or perhaps they sub-contracted it?
Or could it be that the “written summary” of the advice doesn’t mention tax avoidance because it is in the full advice, rather than in the summary.
I’m also confused how “it is plain from the Advice Summary” that your analysis is flawed. By way of example, if you said the answer was “42” and counsel said it was “21” because you had forgot to divide by two then that might well mean that your analysis was flawed. But if you said the answer was 42 and the summary didn’t comment on that, how does that summary make your analysis flawed, let alone make it plain that it is flawed? Is this because the person who wrote the BW LLP letter doesn’t realise how important “42” is? Or is “plain” one of these words that some lawyers use in the same was as some people say something is “clearly” right when it is anything but? So a parallel to David Allen Green’s First Rule of Clarity?
Again, the use of the phrase “unlawful tax advantage” (which you noted you did not use in your reply) suggests that the BW letter might not have been reviewed by a tax specialist.
The lack of any specificity in the letter reminds me of Denis Healey’s comments on Sir Geoffrey Howe.
Anyone, legal or lay, can demand a retraction and claim that they have been libelled. At the moment this is libel 101. They are merely demanding an equal notoriety retraction and apology along with some sort of future non-disparagement statement. I also find the statements about choice of counsel a bit odd but I think it’s a refutation that the first counsel was chosen in order to get the client the answer they wanted and now assert that they have a second opinion to prove it. If they want to take it further after Dan’s refusal to accede then they will have to show both their tax and libel mettle.
On the letter from the solicitors: they say that the KC was picked because she has acted for both private individuals and enterprises; and the taxpayer. Aren’t they the same side?! Isn’t the “other side” here HMRC?
Another great response to what is clearly a firefighting operation by the soon to be squeaky bums over at P118. Mark Alexander clearly hasn’t ‘read the room’ and has bizarrely uploaded an article about hybrid LLPs and how P118 can ‘help’ people who’ve been tricked into entering one of these avoidance schemes.
That right there should give any and all of the portfolio Landlords who’ve used their SIS ‘avoidance’ structure nightmares. I’m not a tax expert (just like everyone at P118 and Cotswold Barristers), but even I can see their structure is solely and OBVIOUSLY a blatant tax avoidance scheme that as a minimum should’ve been disclosed under DOTAS.
I reckon both Marks will be on the meercat site now looking for a quick quote for some ‘new’ liability insurance, because whoever underwrites them now will surely be aware they are in for a deluge of potential claims if they’ve gotten wind of the SIS scheme.
Keep up the good work Dan, I just hope the Landlords who went into this with good faith don’t end up the losers here. If it was me, I’d be selling up asap.
I never thought tax could be so absorbing!!!! It’s fascinating stuff and leads you to think how many more of these schemes are out there that need investigating.
Am enjoying the back and forth on this.
Something that has just struck me is that the provision of the bridging loan that sits in a client bank account (for seemingly no reason) has the potential to breach the SRA rules on providing banking services to clients.
Brilliant and yet simple (which is hard to do) rebuttal
I too would love to buy the shares for a Tenner, as DN suggests (in the annotated KC’s opinion). can I be next in the queue? ☺
I bid £20!
I have no background in law or taxation, but I really appreciate the work you and your colleagues are doing . A fair (or as near as we can get) taxation system is all we need. Just because something is within the law doesn`t mean its right.
What a wonderful riposte Dan. I laughed out loud when I read the final line 😉