Continued Uncertainty For Scottish Property Held Within A Pension Fund


In specie transfers of Scottish property between pension providers remains in danger of LBTT charges.

The devolution of the taxation of the United Kingdom continues to cause issues with pensions. HMRC do not levy stamp duty charges on in specie transfer between pension providers meaning should a client want to move providers they are not hit by an unfair additional tax charge.

However, Revenue Scotland do not provide a similar exemption for the equivalent tax charge for properties in Scotland. This charge, the Land and Buildings Transaction Tax (LBTT), came into being in 2015 but it was only last year that the impact of the change on pensions became apparent.

Revenue Scotland issued a Technical Bulletin in October 2016 which states:

“We have considered the application of LBTT legislation to pension fund in specie transfers and have concluded that generally such transfers give rise to an LBTT liability, on the basis that

(a) such a transfer is a land transaction and

(b) the assumption of the liability by the receiving pension fund is debt as consideration.

We are aware that HMRC has longstanding guidance that land transactions involving in specie transfers between pension funds are not chargeable to SDLT. We understand that there is concern, because of the HMRC position.

If you are unsure about the application of the legislation to the circumstances of a specific transaction, you may wish to ask for a Revenue Scotland Opinion.”

Unfortunately multiple representations to Revenue Scotland hasn’t convinced them that this is an unfair tax even where the underlying beneficiary isn’t changing. There is hope on the horizon that bare trusts may be exempt from this charge but not many pension schemes would fall into this category because of the discretionary nature of the trusts.

Further clarification is expected from Revenue Scotland soon although it isn’t expected to provide any real changes.


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