The Scottish Government has published a consultation (the “Consultation”) on the potential introduction of relief from land and buildings transaction tax (“LBTT”) for the ‘seeding’ of properties into a property authorised investment fund (“PAIF”) or a co-ownership authorised contractual scheme (“CoACS”) (access here).
A similar relief from stamp duty land tax (“SDLT”) was introduced for the rest of the UK by the Finance Act 2016. The effect of this relief is that no SDLT is payable at the point at which property is initially transferred into a fund (“seeded”) in the period beginning with the effective date of the first seeding transaction and ending either eighteen months later, or on the date of the first external investment into the PAIF, whichever is earlier.
The Scottish Government is now proposing to replicate this relief in Scotland for LBTT purposes, noting in the Consultation that it expects that this would mirror the relief available in the rest of the UK “in the first instance”. This would remedy the current anomalous position that a fund seeding pan-UK property into a PAIF or CoACS is not subject to SDLT in respect of property situated in England and Northern Ireland, but is subject to LBTT in respect of property situated in Scotland.
The Scottish Government emphasises in the Consultation that the proposed “seeding relief” would be a time-limited proposition and that, following seeding, LBTT would be due where new properties are acquired by the seeded fund. The Consultation also calls for views on whether any negative impacts might arise from these proposals, in particular whether the proposals might give rise to potential opportunities for tax avoidance.
Responses to the Consultation should be submitted through the consultation website (at the above link), or alternatively by post to David Kerrouchi, Scottish Exchequer, Scottish Government, 3D North, Victoria Quay, Edinburgh EH6 6QQ by 2 August 2018.