Tax authority Revenue Scotland has stated if an in specie transfer takes place between two bare trusts then there is no transfer of ownership.
A bare trust is a basic trust in which the beneficiary has the absolute right to the capital and assets within the trust, as well as the income generated from these assets.
At Revenue Scotland’s Land and Buildings Transaction Tax Forum last week, the tax office confirmed there is no land transaction on Sipp to Sipp property transfers so no land and buildings transaction tax is due.
While these types of transfers have not been subject to stamp duty in the rest of the UK, when powers were devolved to Scotland, Jeff Steedman, head of Sipp and Ssas business development at Xafinity Sipp, said Revenue Scotland took a different stance.
He said the position on whether a Sipp to Sipp property transfer could be hit with a tax bill by the Scottish tax authority had been unclear since September 2016 and those making an in specie transfer had first started getting a tax bill.
Revenue Scotland was established as a non-ministerial department on 1 January 2015 and is the tax authority responsible for the administration and collection of Scotland’s devolved taxes - land and buildings transaction tax and Scottish landfill tax.
These taxes came into effect on 1 April 2015, replacing their UK equivalents - stamp duty land tax and UK landfill tax respectively.
I just hope that some of the additional legislative gaps are closed and rules clarified to avoid ambiguity.Chris DaemsMr Steedman said the lack of clarity on this issue from Revenue Scotland had stagnated the progress of many in specie transfers with the potential for an unexpected tax charge hanging over Sipp to Sipp property transactions.
While Mr Steedman said he was told formal guidance from Revenue Scotland wouldn’t appear for another four weeks, the clarification paved the way for transfers between two bare trusts to move forward without the threat of a tax bill.
He said: “Most Sipps operate under bare trusts and could benefit from this clarification.
“However, some Sipps and most Ssas do not use bare trusts and the current position in relation to transfers to/from non bare trusts is that Revenue Scotland still considers this a taxable transaction.
“They are still considering their position in relation to these types of transfer and will provide further clarification when they issue their formal guidance.”
A spokesman for Revenue Scotland said: “Paragraph five of Schedule 18 of the Land and Buildings Transaction Tax (Scotland) Act 2013 sets out the statutory requirements for bare trusts in relation to a trustee.
“If legal title of a property is transferred from the trustees of one bare trust to the trustees of another bare trust, but the beneficiary of those bare trusts is the same individual, then there will be no land transaction for the purposes of Land and Buildings Transaction Tax as the beneficial owner of the property has not changed.
“This principle applies for transfers of property between pension providers when they are constituted as bare trusts.”
For example, where pension provider A ceases to be the bare trustee for, and pension provider B becomes the bare trustee for, heritable property whose beneficial owner is, and remains C, there is no land transaction for LBTT purposes.
According to Revenue Scotland this is because C was the beneficial owner when A was trustee and remains the beneficial owner when B is trustee so there is no transfer of ownership over land for land and buildings transaction tax purposes.
“Where there is no land transaction, there is no land and buildings transaction tax liability.”
Chris Daems, director of Cervello Financial Planning, said any clarification provided by the tax authorities relating to pensions is a move in the right direction.
He said: “I just hope that some of the additional legislative gaps are closed and rules clarified to avoid ambiguity.”
emma.hughes@ft.com
