Background

Ad description

Advertising for CDP Tax and Wealth Ltd t/a Fiducia Wealth & Tax, which offered financial advice.

a. A website, fiducia.co.uk, seen 7 August 2017, was headed “Calculate Stamp Duty Land Tax We Will Save You A Minimum Of 60%”. Text stated “We do not promote nor advocate stamp duty avoidance schemes. Instead we seek to efficiently plan our clients’ property tax affairs by only utilising government approved statutory tax rules that are contained within the tax legislation, so that our clients only pay the tax intended by Parliament”.

Text accessed via the link “Stamp Duty Land Tax” stated “At Fiducia, we tailor our stamp duty land tax (SDLT) strategies to each individual property purchase and client, making sure that every regulation is fully catered for along the way”. Under the sub-heading “Our plans” text stated “Don’t require any input from your vendor, don’t require you to notify HMRC and reduce delays in the conveyancing process overall”.

Claims on the Stamp Duty Land Tax FAQ page stated “Can I be confident that there won’t be issues later on?”. A dropdown response stated, “The implementation of your tax planning will be carried by a number of SRA-regulated (Solicitors Regulation Authority) firms, and one of the cornerstones of their regulation is that the firms must act in your best interests at all times”.

b. An ad on the Washington Post website, seen 25 July 2017, stated “Save 60% On Stamp Duty … £350k Minimum Purchase Value” and linked to ad (a).

Issue

HMRC, and another complainant, a tax lawyer, who believed the claims related to a Stamp Duty Land Tax (SDLT) avoidance scheme, challenged whether:

1. the claim in ad (a) that Fiducia Wealth & Tax “do not promote or advocate stamp duty avoidance schemes …” and the claim in ad (b) “save 60% On stamp duty” were misleading, because they believed the arrangement being promoted met the definitions of tax avoidance and made the payment of stamp duty appear optional, contrary to government guidance;

2. the claim that Fiducia Wealth & Tax “…seek to efficiently plan our clients’ property tax affairs by only utilising government approved statutory tax rules that are contained within the tax legislation, so that our clients only pay the tax intended by Parliament” misleadingly implied that their arrangements did no more than use statutory reliefs from SDLT for the purpose for which they were designed, which HMRC did not believe was the case, because the scheme in question artificially changed the nature of the land transaction so as to turn an eligible (for the purposes of stamp duty) property purchase into an exempt transfer;

3. the claim “Our plans … don’t require you to notify HMRC” in ad (a) was misleading, because there were detailed rules for determining whether an SDLT scheme was notifiable to HMRC (under the Disclosure of Tax Avoidance Schemes (DOTAS)), only the Tax Tribunals and higher Courts could decide if HMRC should be notified and it was HMRC’s view that the sorts of arrangements promoted in the ads were of a type that could be caught by DOTAS;

4. the claim “Can I be confident that there won’t be issues later on? The implementation of your tax planning will be carried by a number of SRA-regulated (Solicitors Regulation Authority) firms, and one of the cornerstones of their regulation is that the firms must act in your best interests at all times” misleadingly implied endorsement from the SRA, whereas HMRC maintained that the SRA had issued a warning in relation to SDLT schemes; and

5. ad (a) misled by omission, because it failed to make clear that there might be actions or costs if the HMRC challenged the arrangement, including those costs which arose as a result of the General Anti Abuse Rule (GAAR).

Response

1. CDP Tax and Wealth Ltd t/a Fiducia considered that the emphasis in the claim was “schemes”. They stated their clients’ circumstances were individually assessed by tax counsel, and then appropriate recommendations were made. They gave examples: counsel might conclude that no actions were appropriate, or might make a series of actions which were intended to manage a client’s potential tax liabilities, regardless of whether the tax was classified as, for example, SDLT, Capital Gains Tax, Corporation Tax and so on. They stated they did not control or guide counsel.

They did not consider that the ad was implying that the payment of SDLT was optional, but was suggesting that a saving might be available. They considered that the ads were an invitation for prospective clients to discuss their services. They added that only a small number of potential customers went on to retain their services, as their services were not always appropriate.

They did not accept that there was a legal, statutory or binding definition of tax avoidance. They referred to the conduct rules of the Chartered Institute of Taxation, which they stated had been agreed in conjunction with HMRC, and to a paper from the Oxford University Centre for Business Taxation, which both indicated that the definition of tax avoidance was an evolving area that depended on tax legislation and that transactions did not generally fall into clear categories.

They stated they had provided planning that fell under the DOTAS regime, were familiar with the arrangements registered under its requirements, and knew of several hundred registered schemes, but understood that HMRC had not challenged the vast majority of them since 2003.

They stated they were not able to outline, in response to the ASA’s enquiries, the detailed steps involved in the tax planning structure.

2. Fiducia stated that they had extensively discussed their SDLT funding structure with HMRC, who had not, prior to the complaint made to the ASA, directly raised any technical questions relating to the efficacy of the planning. They stated that the planning relied on the use of specifically set out statutory exemption within the SDLT legislation (specifically the Finance Act 2003). They added that HMRC had been provided with the details of the structure and how the exemption was used, and HMRC had not indicated that the structure did not work.

They acknowledged that HMRC might take the view that their use of the statutory exemption was artificial, but considered that until such a time as it was established by way of tax tribunal, their view did not constitute a legal, statutory or binding definition, and remained their view only.

3. Fiducia stated they were familiar with the DOTAS regulations and associated reporting regime. They had previously provided tax planning structures that fell within DOTAS; they therefore considered they complied with the requirements of DOTAS and had reported in full to HMRC. They considered that the default position relating to tax planning in the context of DOTAS was that any such planning would start from a position of being outside of the DOTAS regime and it was only if certain conditions were satisfied that the planning was reportable.

They provided advice from a tax barrister which stated “… in my view the SDLT treatment proposed here ought not to be vulnerable to a challenge under GAAR or otherwise. The emphasis, as far as addressing GAAR and satisfying the general provisions are concerned, must remain on the interest constituting a ‘security interest’. The arrangement between A and B must not be somehow capable of being viewed as a sham and if A occupies the property under the terms of a lease, then it must be shown that he does comply with the various covenants in it. For the reasons given by me above, no liability to report the acquisition of the ‘security interest’ itself ought to arise under either the general reporting requirements or under DOTAS”.

4. Fiducia did not consider that the claim implied endorsement. They reiterated that they were not able to outline, in response to the ASA’s enquiries, the detailed steps involved in the tax planning structure, but confirmed that two parties were required to implement the structure. One party represented a trust party and the other represented their buyer client. Both parties were independently represented by solicitors to ensure there was no potential for conflict of interests, as defined under Rule 3 of the SRA Code of Conduct.

5. Fiducia did not consider that their ads misled by omission.

Assessment

1. Upheld

The ASA acknowledged HMRC’s understanding that Fiducia promoted Stamp Duty Land Tax (SDLT) avoidance and advertised a scheme known as a ‘Security Interest Scheme’.

HMRC stated that SDLT was payable for those able to buy a property or land over a certain price in England, Wales and Northern Ireland. However, certain types of transactions were exempted; one exemption prevented mortgage companies incurring SDLT when they took an interest (a “security interest”) over a property as security for a mortgage. HMRC maintained that Fiducia were selling a scheme which sought, using a complex series of transactions, to apply that exemption to the purchases of properties so that they paid no SDLT on the purchase.

We further understood that HMRC considered that such schemes did not work, that tax was due on the purchase of the property and it was contrary to the intentions of Parliament. We understood that HMRC was investigating and challenging the use of such schemes and was concerned it might result in those who had used the schemes facing a larger than expected tax bill, because they would be obliged not only to pay the tax and the interest accumulated on it, and possibly penalties as well.

We noted that Fiducia’s website contained further information about SDLT for “Personal” and “Business” readers. We therefore considered that the ad was targeted at consumers interested in purchasing property, as well as traders and businesses including small business owners, sole traders and the self-employed.

We noted that the official guidance from the Government and HMRC defined tax avoidance as follows: “Tax avoidance involves bending the rules of the tax system to gain a tax advantage that Parliament never intended. It often involves contrived, artificial transactions that serve little or no purpose other than to produce this advantage. It involves operating within the letter, but not the spirit, of the law. Most tax avoidance schemes simply do not work, and those who engage in them can find they pay more than the tax they attempted to save, once HM Revenue and Customs (HMRC) has successfully challenged them”.

We considered that definition was in line with the way consumers and businesses, including small business owners, sole traders and the self-employed, would understand the meaning of tax avoidance.

We considered that consumers, traders and businesses would be reassured by the claim in ad (a) that Fiducia Wealth & Tax “do not promote or advocate stamp duty avoidance schemes …” and would infer that the arrangement was not a system of avoidance which would be challenged by HMRC.

We further considered consumers, traders and businesses would infer from the claim in ad (b), “save 60% On Stamp Duty”, that they could benefit from payment of stamp duty at a reduced rate and would not be subject to a challenge from HMRC. We therefore considered they would take the transactional decision to seek further information from the website (ad (a)), with a view to achieving that saving.

Although we acknowledged that Fiducia said they assessed individuals’ circumstances and maintained that, following counsel, they did not advise all clients to enter the advertised scheme, we did not consider that we had seen sufficient evidence to show that Fiducia’s arrangement was not a scheme of avoidance and would not be subject to a challenge from HMRC. We therefore concluded that the claims were misleading.

On that point, the ad breached CAP Code (Edition 12) rules  3.1 3.1 Marketing communications must not materially mislead or be likely to do so.    3.3 3.3 Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that the consumer needs to make informed decisions in relation to a product. Whether the omission or presentation of material information is likely to mislead the consumer depends on the context, the  medium and, if the medium of the marketing communication is constrained by time or space, the measures that the marketer takes to make that information available to the consumer by other means.  (Misleading advertising) and  3.7 3.7 Before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove claims that consumers are likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation.  (Substantiation).

2. Upheld

We understood that HMRC considered that Fiducia structured property purchases in a way that contrived steps were taken with the aim of artificially changing the nature of a land transaction that wouldn’t otherwise be exempt so it could be presented as an exempt transfer.

HMRC understood that the scheme aimed to take advantage of sections 48(2) and (3) of Finance Act 2003; those provided that “security interests” in land were exempt interests for SDLT purposes. HMRC stated that, typically, that meant mortgages; the lender in those situations (usually a bank or other financial institution) did not acquire a major interest in the property in question and so did not face an SDLT charge. The charge fell, instead, on the borrower, and only in the event that the borrower defaulted was the property transferred to the lender.

HMRC stated that the Fiducia Securities Interest (FSI) scheme involved a number of artificial arrangements that sought to activate those provisions – principally the setting up of a trust, a loan agreement between purchaser and trust, and the granting of a lease from purchaser to trust. All of those agreements were designed to change the purchaser’s acquisition of a property into an exempt transaction and without them SDLT would be due.

HMRC understood that the purpose of the scheme was purported to be to enable the trust to purchase the property, but stated there were very simple ways in which that could be achieved differently. For example, the trust (via trustees) could enter into the purchase agreement directly with the vendor, funded by a loan which was secured against the title – this would mirror a standard mortgage situation, and would produce the same tax outcome as a normal property (paying tax) and transfer it into the trust (tax free).

We noted that HMRC’s view was that the FSI scheme had been conceived to manipulate the SDLT rules for a tax advantage that was contrary to the express intention of Parliament; Fiducia’s portrayal of it as utilising “government approved statutory tax rules” was misleading.

We considered that consumers, traders and businesses would understand the claim that Fiducia Wealth & Tax “…seek to efficiently plan our clients’ property tax affairs by only utilising government approved statutory tax rules that are contained within the tax legislation, so that our clients only pay the tax intended by Parliament” to mean that Fiducia’s clients paid stamp duty at a reduced rate through the advertised scheme, and would be paying sufficient tax, in line with the contributions required by the HMRC.

We acknowledged that Fiducia considered HMRC were aware of the relevant details of their scheme and maintained HMRC had not directly indicated that the structure did not work. However, we considered Fiducia had not provided sufficient information or documentation to explain the nature of their arrangement and how they ensured that the arrangement did no more than use statutory reliefs from SDLT for the purpose for which they were designed, ensuring it would not leave users at risk of a challenge from HMRC. For that reason, we concluded the claims were likely to mislead.

On that point, the claims breached CAP Code (Edition 12) rules  3.1 3.1 Marketing communications must not materially mislead or be likely to do so.    3.3 3.3 Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that the consumer needs to make informed decisions in relation to a product. Whether the omission or presentation of material information is likely to mislead the consumer depends on the context, the  medium and, if the medium of the marketing communication is constrained by time or space, the measures that the marketer takes to make that information available to the consumer by other means.  (Misleading advertising) and  3.7 3.7 Before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove claims that consumers are likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation.  (Substantiation).

3. Upheld

We understood that there were rules for determining whether or not an SDLT scheme was notifiable to HMRC under the Disclosure of Tax Avoidance Schemes (DOTAS) legislation. HMRC stated that businesses must consider all the rules to decide whether they applied in their case. They added that the final arbiters of notifiability were the Tax Tribunals and the higher Courts. HMRC also maintained that HMRC had not agreed that the arrangement in question was not notifiable.

We considered consumers, traders and businesses would understand from the claim “Our plans … don’t require you to notify HMRC” that Fiducia had carried out all the requisite checks, both internally and with HMRC, and that the advertised arrangement was not notifiable to HMRC, and would not leave users at risk of a challenge from HMRC.

We acknowledged that Fiducia had provided a legal opinion from a tax barrister that indicated that “the SDLT treatment proposed ought not to be vulnerable to a challenge …” and that no liability to report the acquisition of the ‘security interest’ itself ought to arise under … DOTAS”.

However, we considered that the claim that HMRC did not need to be notified would be interpreted to be categorical, and we did not consider that the tax barrister’s advice, which was not expressed categorically, was sufficient to support the claim.

We therefore concluded that the claim “Our plans … don’t require you to notify HMRC” was misleading.

On that point, the ad breached CAP Code (Edition 12) rules  3.1 3.1 Marketing communications must not materially mislead or be likely to do so.    3.3 3.3 Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that the consumer needs to make informed decisions in relation to a product. Whether the omission or presentation of material information is likely to mislead the consumer depends on the context, the  medium and, if the medium of the marketing communication is constrained by time or space, the measures that the marketer takes to make that information available to the consumer by other means.  (Misleading advertising) and  3.7 3.7 Before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove claims that consumers are likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation.  (Substantiation).

4. Upheld

We considered that consumers, traders and businesses would understand that the ads were providing an overview of Fiducia’s advertised scheme, so they could determine whether the arrangement might be relevant to their financial and tax arrangements and decide whether to seek further information by contacting the firm. Whilst we accepted that businesses would expect the ads to present the benefits of a scheme, we considered they would also expect Fiducia to provide relevant information about the tax implications and other risks associated with entering into the scheme.

We understood, from information provided by HMRC, that the SRA had issued a warning notice in relation to SDLT schemes and was concerned about the promotion or facilitation of SDLT schemes. They stated that the SRA was concerned with schemes involving residential properties and whether any solicitor considering becoming involved in the implementation or promotion of an SDLT scheme could comply with the principles in the SRA Handbook. We understood that the SRA had said “In view of the level of concern on the part of HMRC and the fundamental importance of integrity in the provision of legal advice, we are likely to look very closely at the conduct of any firm that is actively involved in these schemes. We are taking action in a number of cases ... There are further cases due which may result in more substantial penalties”.

We considered that consumers, traders and businesses would be reassured by the claim “Can I be confident that there won’t be issues later on? The implementation of your tax planning will be carried by a number of SRA-regulated (Solicitors Regulation Authority) firms, and one of the cornerstones of their regulation is that the firms must act in your best interests at all times”, which reinforced the impression that the scheme would enable users to pay the appropriate amount of tax and not be at risk of a challenge from HMRC.

We further considered that some consumers, traders and businesses would understand that the advertised scheme had been specifically considered and approved by the SRA, and was therefore endorsed by that body, particularly as their logo appeared on Fiducia’s website. We noted we had not seen any documentation to show that such consideration, approval or endorsement had been given by the SRA.

In light of the concerns which we understood had been raised by the SRA about the promotion or facilitation related to the payment of SDLT, and in the absence of supporting documentation showing that Fiducia’s arrangement had been endorsed by the SRA, we concluded the claim was likely to mislead.

On that point, the claim breached CAP Code (Edition 12) rules  3.1 3.1 Marketing communications must not materially mislead or be likely to do so.    3.3 3.3 Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that the consumer needs to make informed decisions in relation to a product. Whether the omission or presentation of material information is likely to mislead the consumer depends on the context, the  medium and, if the medium of the marketing communication is constrained by time or space, the measures that the marketer takes to make that information available to the consumer by other means.  (Misleading advertising) and  3.7 3.7 Before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove claims that consumers are likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation.  (Substantiation).

5. Upheld

We noted the ad did not make any reference to GAAR, nor did it set out any other risks about the status of the scheme. We considered that relevant information about the implications or risks of entering into Fiducia’s arrangement would be material and should have been set out in Fiducia’s advertising.

Because the ad omitted further information about the implications or risks of entering into Fiducia’s arrangement, such as the relevance of GAAR, we concluded that it was misleading.

On that point, ad (a) breached CAP Code (Edition 12) rules  3.1 3.1 Marketing communications must not materially mislead or be likely to do so.    3.3 3.3 Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that the consumer needs to make informed decisions in relation to a product. Whether the omission or presentation of material information is likely to mislead the consumer depends on the context, the  medium and, if the medium of the marketing communication is constrained by time or space, the measures that the marketer takes to make that information available to the consumer by other means.  (Misleading advertising) and  3.7 3.7 Before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove claims that consumers are likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation.  (Substantiation).

Action

The ads must not appear again in the form complained of. We told Fiducia to ensure they held sufficient evidence for their claims and to disclose any relevant information in their advertising, such as the implications or risks of entering into a financial arrangement, including a challenge to a user’s tax arrangements by HMRC and the charges which might apply. We also told Fiducia not to imply they had been endorsed by the SRA.

CAP Code (Edition 12)

3.1     3.3     3.7    

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