Thu 26 Nov 2015
The Government has confirmed the introduction next year of relief from stamp duty land tax (SDLT) for seeding Property Authorised Investment Funds (PAIFs) and changes to the SDLT treatment of Co-ownership Authorised Contractual Schemes (CoACSs) designed to remove barriers to investments in these funds.
PAIFs were introduced in 2008 to encourage collectivised investments in property. They are not SDLT-transparent and incur SDLT on the acquisition of property even when investors “seed” the PAIF at its launch by transferring their own property portfolios into it so there is no change in economic ownership. This has been a significant impediment to launching these vehicles in the UK.
CoACSs, on the other hand, appear to be tax-transparent for SDLT as well as for all other taxes so that SDLT is payable on changes in ownership of units, as they are treated as changes in the ownership of the underlying land. Although their transparent nature prevents any SDLT charge where a CoACS is first seeded with property by one investor who then holds all the units in the scheme, charges on seeding can still arise in other circumstances.
The proposals were first announced in the 2014 Budget and at the time of the 2014 Autumn Statement the Government reiterated its intention to proceed with the changes as part of its UK Investment Management Strategy aimed at encouraging the growth of fund management in the UK, subject to addressing their concerns over the potential for tax avoidance.
These concerns would now appear to have been addressed and legislation will be introduced to provide relief from SDLT on the transfer of property into a PAIF or CoACS when it is initially setup and will also provide that no SDLT arises on transactions in units of a CoACS. There will be a defined seeding period of 18 months, a 3 year clawback mechanism and a portfolio test of 100 residential properties and £100 million value or 10 non-residential properties and £100 million value. The changes will take effect from the date of the Royal Assent to the 2016 Finance Bill.
For more information contact James Summers
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