Resolution on LBTT anomaly
For many years those who held commercial properties in Scotland within their self-invested pension schemes (SIPP or SSAS schemes) were able to transfer commercial property between pension providers without any liability to stamp duty land tax, or stamp duty before that.
The advent of land and buildings transaction tax (LBTT), which replaced stamp duty land tax in Scotland in 2015, changed the landscape. Revenue Scotland took the view that such a transfer of commercial property between pension providers for the same beneficiary was liable to LBTT. Its interpretation was that such a transfer was a “land transaction”, with the chargeable consideration being the assumption by the new pension provider of the obligations owed to the pension member. This was despite the wording in Scotland being identical to that in England and Wales, with the result that the same transaction governed by identical wording was, therefore, being treated in opposite ways by Revenue Scotland and HMRC in England and Wales.
This inconsistency was damaging to the pensions industry in Scotland. Consumer choice was restricted and pension investors were stuck with providers who they felt were too expensive or not providing the service required. Representations were made by us to challenge Revenue Scotland’s position. Revenue Scotland initially stood its ground, before announcing at its LBTT Forum in April that updated guidance would be produced. It was finally made available on 28 December 2017.
It was the news the industry had hoped for – Revenue Scotland has conceded the issue, and the position has reverted to the previous treatment of such transactions. It confirmed that “in-specie” transfers will no longer be seen as “chargeable” and in a statement said, “following further representations on the matter, while such transfers are still considered to be land transactions, debt in the form of the liability assumed to pay benefits to pension scheme beneficiaries will not generally be considered to be given as chargeable consideration in relation to such transactions.”
This means Scotland has been placed once again on an equal footing with England and Wales. The decision brings back extra flexibility to transferring properties that are already held in a SIPP or SSAS.
In addition, Revenue Scotland will apply its new position both prospectively and retrospectively, meaning many savers could potentially be in line for sizeable rebates, as Revenue Scotland refunds any LBTT paid on such property transactions. Now that this anomaly between jurisdictions has been removed, the industry can move forward with a sense of clarity. ● Fergus Mcdiarmid is a partner at law firm Morton Fraser