SRA update: Referral fees and SDLT mitigation schemes
Two current ‘hot topics’ are the forthcoming ban on referral fees and the treasury’s dislike of Stamp Duty Land Tax mitigation schemes. Recent consultation and guidance is available on both issues.
The proposed ban on referral fees in personal injury cases
The SRA published a discussion paper on the proposed ban on 12th June 2012. This explained by the Government had decided to ban refrral fees, dealt in detail with sections 56 to 60 of The Legal Aid Sentencing and Punishment of Offenders Act 2012 [LASPO], and gave an indication of the SRA current approach to the ban.
The document made it plain that the current ‘outcomes- focussed approach’ to regulation would apply and that any breaches of the Act would be viewed within the framework of the current Code of Conduct and the 10 SRA principles that underpin all regulatory issues. The paper reminded practitioners that, other than legal aid and criminal matters, ‘we do not restrict the types of work in which referral fees can be paid’.
The current approach of the SRA is risk based and proportionate. Recognition is made that the referral fee ban means that the Claims Management Companies [CMC] face a ‘challenging future’ as an industry whose niche has been the ability to profit from the ability and willingness of solicitors firms to pay referral fess in return for case leads now faces removal of that niche in it’s primary business sector.
A clear indictation is given that businesses may become Alternative Business Structures [ABS] in order to circumvent the ban. It is indicated that such an arrangement where a firm of solicitors joins forces with a CMC could not be prevented, but conditions could be imposed on the licence of the ABS or the application refused if the plans pose a threat to the public interest or regulatory objectives.
An analysis of responses to the paper was posted on 4th September 2012. Comments included;
- A level playing field with other regulators is required
- Policing the ban is likely to prove difficult
- Clarity as to what arrangements will be compliant is needed.
- Clear guidance ( that has been promised for joint marketing schemes) from the government on what consitutes ‘services for which payment may be made’ is needed as a matter of urgency.
- Concern has been voiced on the effect of the ban on small firms who will go under as a result.
The SRA has promised to issue the formal consultation and is looking to meet with all those who wish to contribute to it’s strategy.
Originally posted 2012-09-24 00:00:00.