The advent of Land and Buildings Transaction Tax (LBTT), which replaced Stamp Duty Land Tax in Scotland in 2015, changed the landscape. Revenue Scotland took the view that such a transfer of commercial property between pension providers for the same beneficiary was liable to LBTT. 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, with the result that the same transaction governed by identical wording was, therefore, being treated in opposite ways by Revenue Scotland and HMRC in England and Wales.
This inconsistency was damaging to the pensions industry in Scotland. Consumer choice was restricted and pension investors in many instances were stuck with providers who they felt were too expensive or not providing the service required. Pension providers were seeing a previously vibrant market in Scotland become virtually extinct.
Representations were made by us on behalf of many clients and others to challenge Revenue Scotland's position on this issue. Revenue Scotland initially stood its ground, before announcing at its LBTT Forum in April that updated guidance would be produced. This guidance was finally made available on 28th December 2017.
It was the news the industry had waited, and hoped for - Revenue Scotland has finally conceded the issue, and the position has reverted to the previous treatment of such transactions. It confirmed that ‘in-specie’ transfers will no longer be seen as ‘“chargeable” and in a statement said, “following further representations on the matter, while such transfers are still considered to be land transactions, debt in the form of the liability assumed to pay benefits to pension scheme beneficiaries will not generally be considered to be given as chargeable consideration in relation to such transactions.”
This means Scotland is no longer at a disadvantage and has been placed once again on an equal footing with England and Wales. The decision brings back extra flexibility to transferring properties that are already held in a SIPP or SSAS. In addition, Revenue Scotland will apply its new position both prospectively and retrospectively, meaning many savers could potentially be in line for sizeable rebates, as Revenue Scotland refunds any LBTT paid on such property transactions.
Now that this anomaly between jurisdictions has been removed, the industry can move forward with a sense of clarity. With many transactions for pension providers having been put on hold or indeed aborted because of this issue, it is vital that this market is re-invigorated for business and the consumer in question.
This article first appeared in The Scotsman.