Fergus McDiarmid: 1 year on from Revenue Scotland’s LBTT reversal

It is almost exactly one year since Revenue Scotland reversed its decision to levy Land and Buildings Transaction Tax (LBTT) on in-specie transfers between SIPP or SSAS providers. The reversal followed almost two years of industry debates, and indeed efforts to have the original decision overturned. Since the advent of LBTT in 2015, when it replaced Stamp Duty Land Tax in Scotland, and until December last year, Revenue Scotland had taken the view that such a transfer of commercial property between pension providers for the same beneficiary was liable to the tax. 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 of the tax provisions in Scotland being identical to that in England and Wales. The result that the same transaction, governed by identical wording, was being treated in opposite ways by Revenue Scotland and HMRC in England and Wales. In essence, Scotland’s LBTT regime was seen to be penalising in specie transfers in comparison with the rest of the UK.Representations were made by Morton Fraser’s Property in Pensions team on behalf of many clients and others to challenge and put pressure on Revenue Scotland's position on this issue and, despite initially standing its ground, revised guidance was finally made available on 28th December 2017. The decision had an immediate impact, with renewed in-specie transactional activity in Scotland. As a result, what we’ve seen over the past 12 months is a far more competitive SIPP and SSAS market in Scotland, with competitive transactional activity and volumes increasing between providers.The reversal has meant market freedom exists again to choose provider. This is important for the industry, with many providers offering a variety of services, costs, product ranges and features. It has also increased the speed and efficiency in which deals can be made.As we prepare to enter 2019, we don’t foresee any slow-down on the horizon. With personal pension planning always being a topic to the fore in the UK, we can’t see any change to the enthusiasm for placing commercial property into a pension structure for the tax and pension benefits it yields. Brexit is an obvious factor to consider, as it will change the landscape of many industries from March next year. Like a lot of sectors, there is uncertainty attached to Brexit for the property in pensions market and a close eye will have to kept on whether it will have an effect on property values.The market has moved on with a real sense of purpose and direction over the past 12 months. We expect this positive feeling to continue to grow, thanks to sales teams and independent financial advisors who work in the sector persuading investors to use their commercial properties in this way. Tremendous momentum has been built up with providers again being able to promote the packages and services available for the benefit of the members and investors, and to compete again on an equal footing across the UK market. Long may it continue.Fergus McDiarmid is a Partner and Property in Pensions Team Lead at Scottish independent law firm Morton Fraser

Fergus McDiarmid: 1 year on from Revenue Scotland’s LBTT reversal

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