Rogue solicitors failing to hand over stamp duty to Revenue

A GROWING number of solicitors are failing to hand over to the Revenue stamp duty paid by clients when purchasing property.

New Revenue figures indicated that in the first five months of 2009 there have been 155 cases where property agents – the vast majority of whom have been solicitors – effectively defaulted on the payment of stamp duty.

This, coupled with the fact that the number of house purchases is falling, represents a dramatic rise compared to previous years, when there were around 200 cases per annum.

Fine Gael TD Brain Hayes, who is pursuing the issue of defaulting solicitors with the Department of Finance, said; “This is a rip-off. If the solicitor does not pay the stamp duty, in full, on the transaction of the property, the property in effect is not registered or stamped.”

He added; “If this trend continues for the rest of the year, we are likely to see an increase in this practice by about a third in 2009. Where a purchaser pays over stamp duty to a solicitor and then that solicitor is struck off by the Law Society, the Law Society will appoint a new solicitor to complete the case and the stamp duty which is owed to Revenue will ultimately be paid by the Law Society. The question must be asked as to how long can this practice continue, where effectively the Law Society is meeting the full financial liability of the defaulting solicitor?”

In a written Dáil question to the Department of Finance Mr Hayes also asked what safeguards were in place to protect house buyers from being penalised due to solicitors defaulting on stamp duty payments.

In his reply, the Minster for Finance Brian Lenihan stated: “On the question of interest and penalties arising from late payment of stamp duty, I am advised by the Revenue Commissioners that all applications for mitigation of interest and penalties are considered on a case by case basis.”

“In cases where a taxpayer has, in good faith, paid stamp duty to a solicitor who failed to pay the duty over to Revenue and that solicitor has since been ‘struck off’ and the practice closed, Revenue gives favourable consideration to mitigating the penalties and interest that would, otherwise, fall to be paid by the taxpayer in order to have the instrument stamped,” he added.

The growing trend of rogue solicitors has resulted in the Law Society, the body which governs the profession, closing down 12 firms in the last three years. So far this year the society has had to close down three firms.

In most cases where the society took such action its Compensation Fund had to reimburse revenue for unpaid stamp duty.

Misconduct by some in the legal professional was also highlighted in the 2008 Court Service Report released this week.

Controversies, including “missing” solicitor Michael Lynn and struck-off solicitor Thomas Byrne, resulted in a more than 100% increase in the number of applications involving solicitors coming before the High Court.

In total, 86 matters involving solicitors came before the High Court last year compared to just 17 in 2007.