The Scottish government is consulting until 2 August 2018 on introducing reliefs from land and buildings transaction tax (LBTT) for property authorised investment funds (PAIFs), similar to those introduced for SDLT in Finance Act 2016. The proposals include full relief for the initial transfer (seeding) into PAIFs and co-ownership authorised contractual schemes (CoACS), and also for when units in CoACS are traded.
Since LBTT became operational in 2015, the investment management sector, law and accountancy firms have raised concerns about the impact on investment vehicles holding property in Scotland of not having reliefs comparable with SDLT.
Relief from SDLT is available where properties are acquired from other types of investment vehicles into a PAIF or CoACS within a period of up to 18 months.
Trading in units held in CoACS is treated as ‘non-transparent’ for UK SDLT purposes, meaning that acquisitions into the scheme are taxed, but trading in the units of the scheme is not. The SDLT rules treat the participants as shareholders in a company, rather than as direct owners of the underlying assets of the scheme. In Scotland, this treatment would require changes to the LBTT (Scotland) Act 2013 through secondary legislation.
The consultation considers whether the Scottish government should introduce the ‘genuine diversity of ownership’ rules used in SDLT to prevent artificial tax avoidance; and ‘portfolio tests’, which limit the application of the relief to transactions involving a minimum number and value of properties, aimed at preventing the risk of enveloping. It asks whether these tests should use the same thresholds as the SDLT portfolio tests, based on total property assets across the UK, or some other measure for Scotland.
Other questions concern whether LBTT should use the same claw-back provisions as SDLT where funds cease to qualify for relief; and whether seeding relief in Scotland should apply only to non-residential property.
The consultation also seeks to gather information on the size of managed property fund assets in Scotland and their exposure to Scottish property.
The Scottish government is consulting until 2 August 2018 on introducing reliefs from land and buildings transaction tax (LBTT) for property authorised investment funds (PAIFs), similar to those introduced for SDLT in Finance Act 2016. The proposals include full relief for the initial transfer (seeding) into PAIFs and co-ownership authorised contractual schemes (CoACS), and also for when units in CoACS are traded.
Since LBTT became operational in 2015, the investment management sector, law and accountancy firms have raised concerns about the impact on investment vehicles holding property in Scotland of not having reliefs comparable with SDLT.
Relief from SDLT is available where properties are acquired from other types of investment vehicles into a PAIF or CoACS within a period of up to 18 months.
Trading in units held in CoACS is treated as ‘non-transparent’ for UK SDLT purposes, meaning that acquisitions into the scheme are taxed, but trading in the units of the scheme is not. The SDLT rules treat the participants as shareholders in a company, rather than as direct owners of the underlying assets of the scheme. In Scotland, this treatment would require changes to the LBTT (Scotland) Act 2013 through secondary legislation.
The consultation considers whether the Scottish government should introduce the ‘genuine diversity of ownership’ rules used in SDLT to prevent artificial tax avoidance; and ‘portfolio tests’, which limit the application of the relief to transactions involving a minimum number and value of properties, aimed at preventing the risk of enveloping. It asks whether these tests should use the same thresholds as the SDLT portfolio tests, based on total property assets across the UK, or some other measure for Scotland.
Other questions concern whether LBTT should use the same claw-back provisions as SDLT where funds cease to qualify for relief; and whether seeding relief in Scotland should apply only to non-residential property.
The consultation also seeks to gather information on the size of managed property fund assets in Scotland and their exposure to Scottish property.
.jpg?sfvrsn=335a554c_0 "300 x 250 (MPU)")