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Why Contemporaneous Notes Are Your Best Defence

Posted on 29 Apr 2025 by Ruby Keeler-Williams

Introduction

In the current climate of professional negligence claims, the phrase ‘if it isn’t written down, it didn’t happen’ has never been a better mantra to live by.

Whether you are an accountant or tax advisor advising on complex planning, a solicitor giving verbal advice during a negotiation or a trustee managing an asset on behalf of beneficiaries, the ability to evidence your actions and the rationale behind them could be the key difference between resolving a potential dispute and a costly judgment.

Contemporaneous notes (which are a written record made at the time of an event) can be extremely persuasive evidence if you are facing a potential professional negligence dispute.

A core element of our practice is Professional Negligence and we have obtained many multi-million pound awards for claimants and successfully defended many claims. I have seen the importance of this issue in practice.

In this article, I will explore why contemporaneous notes are so important, the risks of relying on memory alone, real life case law where note taking or lack thereof made a difference and set out some practical steps professionals can take to protect themselves.

Why Are Contemporaneous Notes Important?

Memory is Limited and Fallible

Human memory has its limitations, particularly in fast paced and high-pressure environments. Over time, memories degrade or become distorted.

Even traumatic events that people may think are deeply embedded into memory are subject to distortion. A good exploration of this topic can be seen in the 2013 Paper ‘The neuroscience of memory: implications for the courtroom’ published by Lacy JW, Stark CEL. Of particular relevance to this article is the section regarding distortion in an original memory after being exposed to misleading information related to that memory. In this context, in the absence of written notes setting out the events and rationale behind them recorded at the time, the language used when being questioned (for example by the insurer defending your claim) about events that have previously occurred can have a significant impact on the accuracy of the recall.

If your memory is distorted, you can appear an unreliable witness, however earnest your intentions. If you make contemporaneous notes, you can refer back to these if a dispute arises and ensure that your recollection is accurate.

Courts Prefer Objective Evidence

If a dispute arises, it often involves both parties recalling events in a conflicting manner. In the absence of a written record, it is up to the court to determine whose recollection is more accurate.

Contemporaneous notes serve as a more objective account, in that they were typically recorded before a dispute was contemplated, meaning that the recollection is not tinged by bias.

Taking Notes Can Help With Detail in Memories

Making a contemporaneous note, especially when giving verbal advice, can also help in ensuring that your memories of events are detailed rather than vague.

An example of this in the context of recalling a verbal discussion can be seen in the study ‘How Contemporaneous Note-Taking Shapes Memory for Conversation’ published by Brown-Schmidt S, Jaeger CB, Evans MJ, Benjamin AS. This study involved 2 parties having a verbal discussion, with one party making contemporaneous notes following the conversation. One week later, both parties were asked to recall the conversation and the study showed that the party that made notes recalled more details of the conversation that the party that did not.

Professionalism and Compliance

Maintaining records is not just best practice; it is often a regulatory requirement. Most professional bodies expect members to maintain adequate records to justify their decisions, advice given and communication with clients.

Examples include:

ICAEW: Requires members to keep sufficient records to demonstrate compliance with standards and obligations.
SRA Code of Conduct: Mandates that solicitors keep records to justify actions and maintain transparency.
FCA: Emphasises record-keeping as part of senior management and conduct responsibilities.

Case Law

Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm)

This is one of the leading cases on the reliability of witness evidence in the context of litigation. You can read the full judgment here.

Here, the now Lord Legatt (then Leggatt J) was asked to evaluate witness accounts of events that had occurred years earlier. In his judgment, he drew on psychological research to caution against placing too much weight on a witnesses confidence in their recollection.

At paragraph 20 of the judgment, Leggatt J observed that recollections may become entangled with subsequent narratives and documentation, making them less reliable than they may appear. Even when a witness appears sincere and confident, that confidence is no guarantee of accuracy, especially where they are attempting to recall what they believed or felt at the time.

His guidance at Paragraph 22 was of particular relevance to this article, as he stated that:

“… the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts … Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.”

This approach has been cited in many subsequent judgements and codified via Practice Direction 57AC of the Civil Procedure Rules, which applies to cases in the Business and Property Courts. The appendix to PD57AC sets out that witness evidence should be based on actual recollection rather than retrospectively constructed from documentation. This witness evidence can then be contrasted at trial with any contemporaneous documentary evidence.

Professionals should take from this case that the courts may distrust your recollection, however strong your belief as to its accuracy, if it contradicts your own written records (or worse so if no written record exists).

Simetra Global Assets Ltd v Ikon Finance Ltd [2019] 4 WLR 112

This case was a successful appeal to order a retrial of a matter before a different judge in the commercial courts. The matter involved dishonest assistance in a fraudulent Ponzi scheme. You can read the full judgment here.

Of particular relevance to this article are the comments at Paragraph 48 of the Judgment:

“In this regard I would say something about the importance of contemporary documents as a means of getting at the truth, not only of what was going on, but also as to the motivation and state of mind of those concerned. That applies to documents passing between the parties, but with even greater force to a party’s internal documents including e-mails and instant messaging. Those tend to be the documents where a witness’s guard is down and their true thoughts are plain to see. Indeed, it has become a commonplace of judgments in commercial cases where there is often extensive disclosure to emphasise the importance of the contemporary documents. Although this cannot be regarded as a rule of law, those documents are generally regarded as far more reliable than the oral evidence of witnesses, still less their demeanour while giving evidence….”

Jaffe & another v Greybull Capital LLP & others [2024] EWHC 2534 (Comm)

This recent case involved a clash of recollections between the parties, specifically as to whether the representative of Greybull Capital LLP made fraudulent misrepresentations in a meeting in October 2026. You can read the full judgment here.

The Judge deemed both witnesses to be ‘patently honest and truthful’ and as such had to determine which of their recollections to prefer. The Judge cited both Gestmin and Simetra in their judgement.

Ultimately, the Judge found that there had been no fraudulent misrepresentation and a key reason for this decision was that one party’s contemporaneous note was in fact a reinterpretation of incomplete handwritten notes taking during the lengthy meeting and had the potential to have been tainted by post meeting discussions.

Mehjoo v Harben Barker [2014] EWCA Civ 358

This case was an appeal following the first instance judgment which found a duty of care that was breached by the accountancy firm failing to advise a non-domiciled client about the availability of a tax shelter.

This was appealed on the basis that this fell outside the documented agreed scope of work. You can read the full judgment here.

In this matter, the Court found in favour of the Accountants partly because the engagement letter and contemporaneous file notes demonstrated that a limited scope had been agreed.

Professionals can take from this that contemporaneous records not only help prove what work was completed, but also what was not included in your remit.

Practical Tips for Professionals

1. Make Note-Taking a Habit

After every client call or meeting, make a short, written record. This should include the date, time, attendees, the issues discussed, the advice given and rationale behind it, decisions made and next steps. This can be done via a formal file note, email summary sent to all parties, or internal system log.

2. Follow Up Verbal Advice in Writing

Send a short confirmation email setting out the advice discussed. This not only protects you but reinforces client understanding.

3. Use Templates and Checklists

Standard templates for client meetings, risk warnings, and conflict checks make consistency easier. They also serve as prompts to ensure nothing critical is overlooked.

4. Record Your Scope of Work and Limitations

Make it clear what you have and haven’t been asked to do. Record whenever you advise a client to seek other expert input (for example legal advice).

5. Store Notes Securely

Store contemporaneous records in a secure, backed-up system that can be accessed by your colleagues. Avoid post-it notes, loose paper, or undocumented phone calls.

6. Train Your Staff

Ensure that you and your team understand that note-taking is a defensive tool, not just an administrative burden.

Conclusion

For professionals working in high-risk environments, the ability to demonstrate what was done, why it was done, and when, is vital. Contemporaneous notes are not just a matter of good practice, they act as a safeguard in future disputes. As the courts have made clear, where recollection fails or is contested, a contemporaneous written record often provides the most persuasive evidence.

Yet, note-taking is just one piece of the wider picture. Maintaining robust compliance, managing risk effectively and responding quickly to potential claims all form part of a sound defence strategy.

This is where we can help. Our focus is to give professionals the confidence that legal and regulatory risks are being actively managed — so that you can focus on your clients and your core work.

We provide:

On-demand legal guidance for your team as issues arise, including conflicts of interest, confidentiality breaches, AML concerns and exposure to potential negligence.
Advice on data breaches, including recording, internal investigation, and assessing reporting obligations to the ICO or other regulators.
Money laundering compliance support, including drafting Policies, Controls and Procedures and offering independent oversight in line with regulatory requirements.
Complaint handling support, including recording and monitoring of all complaints to ensure they are resolved and providing draft responses.
Staff training, focused on practical, scenario-based learning around risk awareness, compliance obligations and documentation.

Mistake and the Unintended Tax Consequences

Posted on 04 Jul 202404 Jul 2024 by Richard Gray

Elysium Law have received enquiries from taxpayers who have received large CGT assessments from HMRC which have been raised as a result of the Trust document used by Property 118 and Cotswold Barristers.

HMRC’s position is that incorporation relief provided by Section 162 of the Taxation of Chargeable Gains Act 1992 is not available as a result of a clause used in the purported Deed of Trust which creates a power of revocation, allowing the Trustees to vest the property in themselves absolutely and bring the trust to an end. HMRC’s position is that this future right to receive the property creates a separate contingent beneficial interest, which is not transferred to the company. As a consequence, the whole of the assets of the business are not transferred to the company and the relief is not available.

As a result, landlords that have implemented Property 118 or and Cotswold Barrister are facing significant and unintended tax consequences.

This will potentially give rise to a claim in professional negligence, but the losses must be mitigated. One option available is an application to the Court to set aside the arrangements on the grounds of mistake.

Should you be the victim of unintended tax consequences, the equitable doctrine of mistake may be open to you

In Bhaur and others v Equity First Trustees (Nevis) Ltd and others [2023] EWCA Civ 53 (Bhaur) the Court of Appeal provided helpful guidance on when a court will set aside a transaction and unwind adverse tax consequences. In summary, this was a tax avoidance scheme using the (abusive) EBT arrangements, to avoid IHT which the court refused to unwind. In this case the presentation of the trust to HMRC was dishonest and was tantamount to tax evasion.

Having lost in the High Court, the Appellants first ground of appeal was that the Judge should have allowed the transaction to be unwound in that the Appellants belief that they would incur no tax consequences was not a misprediction, but a mistake.

The first instance Judgment contains an extended analysis of the law on the setting aside of voluntary dispositions for mistake. The leading authority in the area is the decision of the Supreme Court in Pitt v Holt [2013] 2 AC 108.

In Pitt v Holt, at [103], Lord Walker adopted, the approach of Lloyd LJ in the Court of Appeal ([2011] EWCA Civ 197 at [210]-[211]), setting down three principles which would lay the groundwork for the exercise of the equitable jurisdiction to set aside a voluntary disposition , namely;

A mistake, which is;
Of the relevant type; and
Is sufficiently serious so as to render it unjust or unconscionable on the part of the donee to retain the property given to him.

Misprediction or Mistake – the difference

Misprediction

In Pitt v Holt the Court said a misprediction relates to some possible future event, whereas a legally significant mistake normally relates to some past or present matter of fact or law.

In Dextra Bank & Trust v Bank of Jamaica [2001] UKPC 50, [2002] 1 All ER (Comm) 193 at [29], the court said “… to act on the basis of a prediction is to accept the risk of disappointment. If you then complain of having been mistaken you are merely asking to be relieved of a risk knowingly run …”

Mistake

This is a different consideration. The courts and lawyers generally deal with mistakes as to the consequences of a transaction.

For many years, a distinction was drawn between a mistake as to the effect of a transaction and its consequences. However, the modern approach is that providing the court is satisfied that there is a causative mistake of sufficient gravity; and as additional guidance to judges in finding and evaluating the facts of any particular case, that the test will normally be satisfied only when there is a mistake either as to the legal character or nature of a transaction, or as to some matter of fact or law which is basic to the transaction.

The gravity of the causative mistake is relevant to an assessment of injustice or unconscionability. The court said that the injustice (or unconscionability) of leaving a mistaken disposition uncorrected must be evaluated objectively, but with an “intense focus” on the facts of the case including the circumstances of the mistake and its consequences for the person who made the disposition.

An evaluation – what are the merits of the case?

The court will look at the surrounding circumstances and the (in) justice done to the person making the disposition. The doctrine of mistake applies to unintended tax consequences. In Pitt, the court rejected any suggestion that mistake could not apply to tax issues. However, the court added the following when referring to previous cases and in particular Futter v Futter where the doctrine of mistake was not raised by the (Plaintiff). Lord Walker in Pitt said;

“Had mistake been raised in Futter v Futter there would have been an issue of some importance as to whether the court should assist in extricating claimants from a tax avoidance scheme which had gone wrong. The scheme adopted by Mr Futter was by no means at the extreme of artificiality (compare for instance, that in Abacus Trust Co (Isle of Man) v NSPCC [2001] STC 1344) but it was hardly an exercise in good citizenship. In some cases of artificial tax avoidance, the court might think it right to refuse relief…”

Why you need advice on the scheme

Lawyers and students alike will recognise the maxim ‘He who seeks Equity must do Equity’, but effectively any refusal now is based on public policy consideration. An example of this can be found in the case Dukeries Healthcare Limited v Bay Trust International Limited [2021] EWHC 2086 (Ch), with Deputy Master Marsh holding that, whilst the doctrine of mistake applied, it was refused nevertheless on the grounds that the whole transaction amounted to an artificial tax avoidance scheme.

Anyone affected needs independent advice, considering the degree of risk and any artificiality of the scheme, given that unintended tax consequences are an issue. This should be advised upon by an independent law firm such as Elysium Law and will involve review of the documentation, any advice provided to the Claimant at the time and what it was that was that the Claimant hoped would be achieved.

Should you be the victim of unintended tax consequences, the equitable doctrine of mistake may be open to you.

Elysium Law has been approached to consider bringing such a claim.

For further advice please contact us at Elysium-law

Understanding the Procedural Steps: the Pre-Action Protocol for Professional Negligence

Posted on 25 Jun 202414 Jan 2026 by Ruby Keeler-Williams

The Protocol

Our team has extensive experience in claims for professional negligence, including claims against solicitors, accountants, surveyors, trustees and other professionals and we have been successful in obtaining many multi-million-pound recoveries for Our Clients.

The Pre-Action Protocol for Professional Negligence applies to these claims and covers claims for negligence against all professionals, except those in the construction or healthcare sectors, or those concerning defamation.

The primary purpose of the Protocol is to promote the settlement of claims by ensuring that both parties fully understand the nature of the claim alleged, the evidence supporting the claim, and the defences of the Defendants. By encouraging this early exchange of information, the Protocol aims to reduce the number of disputes that escalate to court, saving time and costs for all involved.

Importance of Complying with the Pre-Action Protocol

Before looking at the Protocol itself, it is important to set out why it is vital that parties comply. Compliance with the Pre-Action Protocol for Professional Negligence is crucial because it establishes the standards that the courts consider the normal and reasonable approach for handling professional negligence claims.

Paragraph 3.1 of the Protocol sets out that, if court proceedings are initiated, the court will determine whether to impose sanctions for substantial non-compliance with it. This guidance is aligned with that set out in the Practice Direction for Pre-Action Conduct and Protocols, which suggests that while the court is likely to disregard minor or technical breaches, substantial non-compliance can lead to significant sanctions against the offending party.

Paragraph 3.2 expands the scope of the Protocol by setting out that the parties are expected to act reasonably when operating the timetable and exchanging information during the Protocol period. This means that even if the Protocol does not explicitly address a specific issue, parties should abide by its spirit by acting reasonably and cooperatively.

Preliminary Notice of Claim

The first step in the Protocol process is for the Claimant to notify the Defendant in writing once there are reasonable grounds for a claim. Paragraph 6.1 of the Protocol sets out that this preliminary notice should:

Identify the Claimant and any other parties.
Contain a brief outline of the Claimant’s grievance.
Provide a general indication of the financial value of the claim, if possible.
Ask the Defendant to inform their professional indemnity insurers immediately.

The Defendant is required to acknowledge receipt of this letter within 21 days, as stipulated in paragraph 6.2 of the Protocol.

Letter of Claim

When the Claimant decides there are sufficient grounds for a claim, a detailed Letter of Claim should be sent to the Defendant in accordance with paragraph 6.3 of the Protocol. This letter must:

Identify any other parties involved in the dispute;
Include a clear chronological summary of the facts, along with copies of any key documents;
Specify the details of the alleged negligent act or omission and what the professional should have done differently;
Set out how the act or omission caused the loss suffered, setting out the consequences and what would have occurred but for the negligence;
Provide an estimate of the financial loss caused by the alleged negligence, detailing how the loss is calculated. If it is not possible to supply these details in the Letter of Claim, the Claimant should explain why and indicate when they will be able to provide this information;
Confirm whether an expert has been appointed, provide the expert’s identity and discipline; and
Request that a copy of the Letter of Claim be forwarded immediately to the professional’s insurers.

Letter of Acknowledgment

The Defendant should acknowledge receipt of the Letter of Claim within 21 days, as required by paragraph 7.1 of the Protocol.

Investigations

Following the acknowledgment, the Defendant has three months to investigate the Claim and respond with a Letter of Response and/or a Letter of Settlement, in line with paragraph 8.2 of the Protocol. During this period, the Defendant should:

Assess whether the Letter of Claim complies with the Protocol’s requirements and, if not, inform the Claimant of the deficiencies and the further information required, as outlined in paragraph 8.1 of the Protocol.
Evaluate whether the Claimant has presented a legally and evidentially sound case or merely alleged wrongdoing without substantial evidence.
Review the provided evidence, including expert opinions and key documents.

If more time is needed to complete the investigation, the Defendant should promptly request an extension from the Claimant, explaining the reasons for the delay and the anticipated extension required, as specified in paragraph 8.3 of the Protocol. The Claimant is expected to agree to reasonable requests for extensions to avoid unnecessary delays.

Response to the Letter of Claim

Upon completing their investigation, the Defendant should send a Letter of Response as detailed in paragraph 9.2.1 of the Protocol. The Letter of Response should:

Be sent in open correspondence (as opposed to being ‘without prejudice’)
Clearly state which parts of the claim are admitted or denied, providing reasons for their stance.
Specifically address the allegations.
Provide the Defendant’s version of disputed events.
Offer an estimate of the financial loss if it disputes the Claimant’s estimate. If an estimate cannot be provided at that time, the response should explain why and indicate when it will be available.
Include copies of key documents not previously exchanged.

This letter, while not a formal defence, is a crucial step, as the court may impose sanctions if it significantly differs from the eventual defence, as outlined in paragraph 9.2.2 of the Protocol.

Paragraph 9.4.1 sets out that if the Letter of Response denies the claim entirely, the Claimant may proceed with court proceedings.

Experts

The protocol recognises that in professional negligence claims, the parties and their advisers will require flexibility in their approach to expert evidence.

In a professional negligence claim, separate CPR 35 expert opinions may be needed on breach of duty, causation or the quantum value of the claim.

Paragraph 11.2 of the Protocol sets out that the parties should co-operate when making decisions on appropriate expert specialisms, whether experts might be instructed jointly and whether any reports obtained pre-action might be shared and should at all times have regard to the duty in CPR 35.1 to restrict expert evidence to that which is reasonably required to resolve the dispute.

Any expert reports obtained at the pre-action stage are only permitted in proceedings with the express permission of the court.

Alternative Dispute Resolution (ADR)

The Protocol imposes an obligation on the parties to consider whether some form of ADR is more suitable than litigation. The courts have a wide discretion to sanction parties in costs if they are held to have behaved unreasonably by refusing to engage in ADR. This is not to say that a party would necessarily face costs sanctions for declining to accept an invitation to participate in an ADR process: this would depend on whether the refusal to participate was reasonable in all the circumstances.

In practice, it is common for the parties to professional negligence claims to engage in some form of ADR, although not necessarily always at the pre-action stage.

Mediation is a commonly used form of ADR for professional negligence claims and often leads to a successful resolution of the dispute, either on the day of the mediation itself or in the course of follow-up negotiations after the mediation.

Conclusion

Adhering to the Pre-Action Protocol for Professional Negligence involves detailed and timely communication between the parties. Every step, from the preliminary notice to managing experts and engaging in ADR, is crucial.

Elysium Law will help you navigate the complexities of the Pre-Action Protocol for Professional Negligence, ensuring full compliance and thereby avoiding potential court sanctions for non-compliance. We will put forward robust representations that effectively outline your claims or defences, facilitating early settlement discussions and saving you the time and costs associated with litigation.

We have extensive experience in representing large, often multi-national groups in claims for professional negligence brought by or against solicitors, accountants, surveyors, trustees and other professionals and have been successful in obtaining many multi-million-pound recoveries for Our Clients.

For further guidance on professional negligence claims, contact our experienced team today.

Less Tax, More Risk: Professional Negligence Claims Against Less Tax 4 Landlords

Posted on 23 Oct 202314 Jan 2026 by Ruby Keeler-Williams

In this article, Ruby Keeler-Williams of Elysium Law explores the tax avoidance scheme advocated by Less Tax for Landlords (LT4L), examining its implications for landlords and the potential basis for professional negligence claims

Following enquiries from individuals affected, we have commenced a review of the tax avoidance scheme being aggressively marketed to landlords by Less Tax 4 Landlords (LT4L).

The circumstances suggest that participating landlords face a perfect storm of adverse consequences – additional tax liabilities, interest, penalties, and even potential mortgage default if lenders deem the structure to breach loan terms.

In this article, we will refer to the meticulously detailed report provided by Dan Neidle at Tax Policy Associates, which serves as an invaluable and comprehensive summary of the prevailing tax position. The report can be found here (Less Tax for Landlords: the £50m landlord tax avoidance scheme that HMRC say doesn’t work, and can trigger a mortgage default)

We have also had sight of client files, in addition to correspondence between numerous tax advisors and Less Tax 4 Landlords regarding their concerns and technical observations.

In our opinion, as a firm with a proven track record of success in professional negligence claims, the assertions set out below, if substantiated, would support a strong claim against LT4L and associated entities for negligent tax advice. Their guidance appears to betray fundamental misunderstandings on key areas of tax law. The scale of the scheme, impacting potentially hundreds or thousands of taxpayers, is deeply troubling. Urgent action is required to mitigate the fallout.

Flawed Inheritance Tax Analysis

A core plank of LT4L’s promotional strategy is the claim that their structure qualifies for business property relief, eliminating inheritance tax exposure. Yet this cannot be correct.

Letting residential property is plainly not “wholly or mainly” a trading activity, but rather an investment activity, as per IHTA 1984 s.105(3). The analysis focuses on the underlying business, not the choice of wrapper. This is confirmed by HMRC guidance and cases like Graham v HMRC [2018] UKFTT 380 (TC). Unless actually operating hotels or quasi-hotels, landlords cannot obtain BPR. No actions or “box ticking” will change this, contrary to LT4L’s suggestions.

Advising that BPR is achievable for ordinary buy-to-let investors is clearly negligent advice. It suggests LT4L fundamentally misunderstands settled inheritance tax law and principles. Clients participating in the scheme likely remain fully exposed to IHT, despite paying large fees to implement LT4L’s flawed structure. This negligent advice may support substantial claims by affected landlords.

Mixed Partnership Muddle

The report highlights equally serious errors regarding the taxation of partnerships. LT4L’s structure hinges on allocation of profits from the LLP to a corporate member to access lower corporate tax rates.

However, the 2014 mixed partnership rules specifically counter contrived profit allocations made for tax reasons. This occurs automatically based on the facts – any tax avoidance purpose is irrelevant. Yet LT4L repeatedly assert the precise opposite in client materials: that tax avoidance purpose is required for the rules to apply.

This betrays a disturbing failure to comprehend a basic pillar of partnership tax law. The rules operate mechanically based on the terms of Profit allocation to a non-contributing partner is ineffective for tax purposes, “tax motivation” aside. By suggesting otherwise, LT4L potentially demonstrates negligent advice, giving rise to claims.

Mistaken Capital Gains Tax Positions

The report evidences similarly flawed advice regarding CGT. Contrary to LT4L’s claims, transferring property into the structure should not “rebase” the base cost for CGT. The landlord retains legal ownership, with the LLP holding the beneficial interest, as reflected in the capital account. Equally, allocation of profits to the corporate member should trigger an immediate CGT charge, not deferred gains.

These are fundamental errors no competent tax adviser could make. LT4L’s advice seems driven by a mistaken belief that accounting treatment dictates tax analysis. This conflation is negligent and likely to lead to significant unexpected CGT liabilities. It further supports negligence claims by participating landlords against LT4L.

Stamp Duty Land Tax: A Litigation Timebomb

Potentially most concerning is the critique of LT4L’s SDLT advice. The report persuasively argues that changes in LLP profit sharing automatically trigger SDLT charges under FA 2003, Sch 15, para 14. This is contrary to LT4L’s assurances of SDLT mitigation. Worse, their structure may incur significantly higher SDLT than normal incorporation, given the loss of reliefs.

The SDLT analysis accords with the legislation and HMRC guidance. Should it be correct, LT4L has exposed clients to major unexpected tax liabilities – plus interest and penalties – which could crystallise many years in the future. The SDLT involved could easily exceed hundreds of thousands of pounds per client. We anticipate a wave of litigation when these liabilities surface.

A Demonstrable Lack of Competence

Most disturbing is the report’s evidence of LT4L demonstrating a lack of basic understanding across multiple areas of tax law. This is perhaps most apparent in their advice regarding partnership taxation. Partners are taxed on profits as they accrue, not when physically distributed – a fundamental principle LT4L appear ignorant of.

Taken collectively, the flawed advice summarised above evidences serious negligence and incompetence regarding key pillars of the UK tax system. The scale of the scheme, potentially impacting hundreds or even thousands of taxpayers, is alarming. LT4L knew or ought to have known their interpretations were unfounded, yet continued promoting the scheme for substantial fees. In our opinion, this conduct easily meets the threshold of actionable professional negligence.

Avoiding Defaulting on Mortgages

Perhaps the most urgent priority is addressing the risk of mortgage default triggered by LT4L’s structure. Declaring a trust over mortgaged properties to transfer them to an LLP may breach the loan terms, causing default. Contrary to LT4L’s assurances, a “letter of trust” has the same effect. Landlords remain the legal owner but lose the beneficial interest the lender may require them to retain.

The potential consequences of default are severe – forfeiture of assets, immediate repayment, litigation costs. Affected clients should seek urgent advice on rectifying the position with lenders. In instances where default has occurred or is unavoidable due to LT4L’s advice, this may represent a further head of claim in negligence against them.

Avenues for Redress

Clients affected by LT4L’s negligent advice should seek urgent tax advice on their position, and strongly consider claims against LT4L and associated entities to recover resulting losses. Potential heads of claim could include:

– Negligent tax/legal advice

– Breaches of contract, failing to advise accurately on the scheme

– Breach of fiduciary duty, giving advice tainted by conflict

– Misrepresentation regarding the scheme and its consequences

– Violations of financial regulation, given links to FCA-authorised firms

Claimants may also have direct recourse against LT4L’s professional indemnity insurers under the Third Parties (Rights Against Insurers) Act 2010. Contrary to LT4L’s misleading suggestions, their standard insurance will likely not cover tax liabilities or interest/penalties – but should respond to successful negligence claims.

Litigation will prove challenging – professional negligence claims always are. But the strength of evidence outlined in the report provides a robust foundation. We anticipate multiple claims against LT4L by landlords facing large, unexpected tax bills thanks to LT4L’s flawed scheme and negligent advice.

Pre-Action Steps

Before commencing litigation, affected landlords should:

– Take urgent tax advice to understand their potential liabilities;

– Instruct a lawyer experienced in these claims such as Elysium Law to advise on their position;

– following your instruction, allow us to Assess the merits of your claim

– Formally put LT4L on notice regarding potential claims;

– Gather all relevant documentation;

– Review funding options including potentially CFAs.

Contact Elysium Law

Elysium has extensive experience running professional negligence group actions against negligent tax advisers. We would be happy to assist any landlord facing significant losses thanks to LT4L’s deeply flawed scheme. With hundreds or even thousands likely affected, we are looking to advance a group claim. We anticipate claims worth tens of millions against LT4L and their insurers. If you have been affected, please contact us.