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Win for holders of Scottish property in pension schemes

18 January 2018

Holders of Scottish Property in their pension schemes have something to celebrate, says Nigel Bennett, sales & marketing director at InvestAcc.

You may have missed the piece of good news issued by Revenue Scotland on 28 December 2017, concerning transfers of Scottish Property between pension schemes. So long as there is no consideration, genuine transfers of property between schemes will no longer be at risk of Land & Buildings Transaction Tax (LBTT).

LBTT replaced Stamp Duty Land Tax (SDLT) in Scotland in 2015. For non-residential properties, the rates are currently as follows (2017/18):

If the value is above the payment threshold of £150,000, LBTT is charged at the appropriate rate on the amount of the chargeable consideration within that band. For example, an office building bought for £450,000 is charged at:

• 0% for the first £150,000

• 3% for the next £200,000 and

• then 4.5% for the remaining £100,000

• so £10,500 must be paid in LBTT

For chargeable leases, the following tax rates and bands apply to the Net Present Value of the rent payable under the lease:

In its October 2016 LBTT Bulletin, Revenue Scotland made an unexpected statement on the treatment for LBTT purposes of in-specie transfers of property between pension funds. This indicated that, in the tax authority’s view, these will generally give rise to an LBTT charge because (a) such a transfer is a land transaction and (b) the assumption of liability by the receiving pension fund is ‘debt as consideration’.

Since then, numerous representations have been made to argue that there is no ‘debt as consideration’ and fortunately Revenue Scotland have now confirmed in their latest update that this is indeed the case, therefore LBTT will not apply to any future transactions and also this change is retrospective for any instances which have suffered tax.

We now expect the market for switching SIPP and SSAS containing Scottish Properties to normalise as LBTT will not apply, provided there is no consideration given in the form of money or money’s worth.

Whilst the outcome of this particular issue has been positive, we shouldn’t be surprised to see further complexity as UK taxes diverge, with Scottish and Welsh Governments using their devolved tax raising powers. Indeed, we only have a few short weeks to wait until Wales replaces Stamp Duty Land Tax (SDLT) with Land Transaction Tax (LTT) from 1st April 2018, under the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017.

The full announcement from Revenue Scotland can be found at LBTT Technical Update 3