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FOS upholds complaint against 2Plan for tax scheme referral


The Financial Ombudsman Service has upheld a complaint against 2Plan Wealth Management for referring a client to a stamp duty tax avoidance scheme which failed.

The client took mortgage advice from 2Plan in 2013. As part of the process, he was referred by the adviser to a separate company which ran the tax avoidance scheme.

The scheme failed and HM Revenue & Customs has since been pursuing the client for the outstanding tax plus interest.

The client, described by the FOS as Mr H, paid half the amount of the tax to the company, which has since gone into administration.

Mr H complained to 2Plan, arguing the adviser actively sold the scheme to him and gave assurances about its reliability.

2Plan told the client in its final response to his complaint that the adviser had not received any commission for the referral. However, in the firm’s submission to the FOS it said the adviser had received commission.

Ombudsman Simon Pugh said the actions of the adviser “went beyond a mere referral”.

He said: “The broker introduced him to the scheme, promoted its benefits and gave him assurances about its safeguards. He told Mr H that he had referred his own children to it and said it was fool proof. This was not a simple referral; this was a sale.”

The adviser also failed to disclose the commission he received to the client.

Pugh said: “Mr H didn’t know the broker had a financial interest in him taking up the scheme and couldn’t take that into account in his decision making.”

The FOS has ordered 2Plan to pay the client £481 – the referral fee received by the adviser.

Support services firm Adviser Advocate chief executive Richard Leeson says: “There is a big difference between suggesting a client speaks to another firm and an arrangement with an incentive in the background where the customer is being told it’s the best thing since sliced bread.

“The FCA’s financial incentives guidance clearly states that firms should mitigate the risks of misselling arising from incentives.

“The important thing is that the incentive does not affect the adviser’s decision – the FOS seems to think it did in this case. But this ruling does not go as far as to say the adviser is responsible for the advice given by the tax firm.”

A spokesman for 2Plan says it does not agree with the decision, but declined to comment further.

Adviser view

Tom Kean, director, Thameside Financial Planning

While it is clear that any commission for a referral should be disclosed to the client, at what point does a glowing recommendation to a firm of accountants become a liability risk for me? We cannot be expected to double check whatever it is they recommend. Having said that, the FOS’ view that just the referral fee should be refunded to the client seems reasonable.


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There are 13 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 5th June 2015 at 2:18 pm

    So 2Plan promoted the benefits of the scheme and gave Mr H assurances about its safeguards. He told Mr H that he had referred his own children to it and said it was fool proof.

    Really? And all this was in writing for the FOS adjudicator to consider as the basis of his verdict was it?

    If this is the way the FOS looks at things, I shall think twice about referring anybody to anyone for anything.

  2. Must be great giving away other people’s money. Unless it was in writing why does the FOS take the word of someone who clearly was happy to try and avoid paying tax?

  3. jon dickinson 5th June 2015 at 2:41 pm

    The current world of a Professional Adviser-If advice given in good faith doesn’t work you end up being sued!If it works you are lucky to get a “thank you”.
    Personal responsibility for one’s own actions doesn’t exist anymore!

  4. Gaynor Newman 5th June 2015 at 2:44 pm

    FOS look at the balance of probabilities if there is a lack of hard evidence. We never make “recommendations” only “introductions” – more than anything this is due to the insistence of our PI insurers (possibly because they’ve experienced claims similar to the article). We simply provide the client with the contact details of a solicitor or accountant and point out we have worked with them in the past and are not responsible for any advice they might received. We never use the term “recommend”. It’s sad that it’s come to this, but unfortunately, that’s the way it is these days.

  5. “The adviser also failed to disclose the commission he received to the client. Pugh said: “Mr H didn’t know the broker had a financial interest in him taking up the scheme and couldn’t take that into account in his decision making.” ”
    Mr H obviously thought the adviser was working for nothing and would have been quite shocked if he found out that the adviser was being paid for his work. Presumably, if Mr H had known that the adviser was getting paid for his work he might have been suspicious.

  6. @Ken Durkin
    Surely the point is that the adviser (acting in the client’s best interests?) is receiving an undisclosed or secret payment ultimately funded by the client. That’s not right.

    Indeed, that’s the only story here. The adviser was not held responsible for any advice given by the third party firm.

  7. Steven Pearman 5th June 2015 at 9:28 pm

    I am confused. This was not a regulated product. The client was fully aware that they saved half the stamp duty liability and the other half was retained. At the time they took this nobody was aware that HMRC was going to circumnavigate the law that amongst others was used by the labour party to save capital.

  8. @Steve Pearman – sorry but the 2012 Budget Statement made quite clear that HMRC was gunning for these schemes.

    However, you should put in your CA that tax advice is not regulated by the FCA.

    It also seems that a number of these schemes are run by unqualified individuals. If you are going to introduce a client to a tax avoidance scheme, make sure they will be getting advice from a Chartered Accountant or a Chartered Tax Adviser and that your client understands that it is them, not you that will be responsible for that advice. Again, put that into your CA.

  9. Steven Pearman 6th June 2015 at 3:23 pm

    @ Peter Turner – I was not aware that it had been made clear that it would be retrospectively allied.

  10. so just to confirm with this (as I couldn’t find the decision on the FOS website), the only thing that the adviser had to pay back was the hidden commission and not any loss caused by the scheme. If that is the case, it seems quite fair.

  11. Sorry Steven but the decision (DRN9697297, Bob) says “In 2013, Mr H took mortgage advice from 2 Plan”. That was after the 2012 Budget statement.

    I repeat my point, though. If you are going to refer a client on, make sure that the person you refer them to is a bona fides professional in their field and document it. Chartered Accountants, Chartered Tax Advisers (and solicitors, for that matter) are all registered with professional bodies or regulators. Make sure that their registration is in existence at the time of the referral – and document it.

  12. Having looked at the case, the Ombudsman has argued that it is in jurisdiction because it is an ancillary activity.

    That an ancillary activity is within jurisdiction is correct – DISP 2.3.1R says any activity that is ancillary to a regulated activity is covered.

    However, the definition of “ancillary” is “activities and services that provide essential support to the functioning of a central service or industry”. I am far from convinced that this was ancillary to the arrangement of the mortgage finance by that definition.

    I say this because the regulated activity was advising on and bringing about a mortgage loan. The tax avoidance scheme (whether it succeeded or not) was not essential to that activity. Nor was the loan essential for attempting the scheme. The outcome would have been the same if no loan was involved.

    That is not to say that there is not an obligation to disclose the existence of the commission – merely that the Ombudsman’s reasons for concluding he had jurisdiction seem dubious.

  13. Oh Come on! Cute dodges are always a risk – and anyway should be steered well clear of. What was this network thinking of allowing one of its number to fish in these murky pools.

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