Relief for SIPPS & SSAS professionals following LBTT U-turn

The recent decision by Revenue Scotland regarding Land and Buildings Transaction Tax in Scotland (LBTT) and its application to in-specie transfers between SIPP or SSAS providers brought to a close a period of almost two years of involvement for Morton Fraser in the debate surrounding the issue in Scotland, writes Fergus McDiarmid of Morton Fraser. The concept of flexibility to allow transfers of commercial properties between SIPP or SSAS providers has always been one of the cornerstones of the SIPP and SSAS market. This flexibility was facilitated by the concession afforded by HMRC that Stamp Duty Land Tax, or before that stamp duty, was not payable on such transfers. Members therefore were able to bring across commercial property to a new provider for any number of reasons, whether based on cost, service or otherwise and this, in turn, undoubtedly kept providers focused on the potential for new business.The introduction of LBTT, which replaced Stamp Duty Land Tax in Scotland in 2015, changed the position in Scotland. Revenue Scotland adopted the stance that such a transfer of commercial property between providers for the same beneficiary was liable to LBTT. This seemed inconceivable to the industry - the wording in the legislation was identical in all jurisdictions, but Revenue Scotland's interpretation was that such a transfer was a land transaction, with the chargeable consideration being the assumption by the new provider of all obligations owed to the pension member by the outgoing provider.This inconsistency had immediate consequences for the industry in Scotland and following contact from a number of our clients in the sector, we were involved in putting together a working group of clients to discuss and propose representations to Revenue Scotland contesting their stance. We put forward a number of arguments based on the interpretation of "consideration" and the fact that the underlying beneficial ownership/beneficiary was not changing, but these were constantly resisted by Revenue Scotland. We did see a slight softening of the Revenue Scotland position when they announced at the LBTT forum held in Edinburgh in April 2017 that they would produce updated guidance. This guidance did not, however, get issued at the forum in October 2017 as it was announced that it had been further delayed (which gave the industry some hope), and was finally made available on 28 December 2017.It was, in effect, doubly good news - Revenue Scotland acknowledged that its interpretation of the position was incorrect and that there was not, in the case of in-specie transfers, a transaction taking place which featured a chargeable consideration subject to LBTT. Such transactions going forward would therefore be placed on an equal footing with those in England and Wales and would not be liable to LBTT. The additional benefit to those who had been penalised was the statement that they would be entitled to reclaim any LBTT previously paid on historic property transactions which had been deemed chargeable.At times, both ourselves and the industry felt that we were going to struggle to overturn a Governmental position. However, we were delighted that the constant lobbying and approaches undertaken by ourselves and our clients, and others in the industry, ultimately resulted in a victory for the industry and many would say common sense. Transactions put on hold were freed up to be completed. The market for in specie transfers now moves on with a sense of purpose and direction, allowing providers again to promote the packages and services available for the benefit of the members and investors, and to compete again in an equal UK market.Fergus McDiarmid is a Partner and Property in Pensions Team Lead at independent law firm, Morton Fraser

Relief for SIPPS & SSAS professionals following LBTT U-turn

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