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Scottish LBTT problem with PAIF conversions now resolved

Scottish LBTT problem with PAIF conversions now resolved

  • United Kingdom
  • Financial institutions - Asset managers and funds


The Land and Buildings Transaction Tax (Open-ended Investment Companies) (Scotland) Regulations 2015 (Scottish SI 2015/322)

The Scottish Government is introducing the exemption from land and buildings transaction tax (LBTT) which will enable PAIF conversions to go ahead.

On 4 September 2015 regulations were laid before the Scottish Parliament introducing an exemption from LBTT for transfers of Scottish land and buildings from authorised unit trusts (AUTs) to open-ended investment companies (OEICs) for both AUTs converting into OEICs and also those merging with existing OEICs. The new exemption comes into force on 6 October 2015 for transactions on or after that date.

The result is that an equivalent relief will exist for Scottish property under the LBTT matching the existing stamp duty land tax (SDLT) relief for property in the rest of the UK.

The introduction will be welcomed by many in the industry who have been lobbying for the change, particularly as several planned property authorised investment fund (PAIF) conversions have been postponed pending its introduction.

The conditions for the relief are the same as those for SDLT: broadly, that all of the property of the AUT must be transferred to the OEIC as part of an arrangement under which the units in the converting or merging AUT are extinguished and the unitholders are issued with shares in the OEIC pro rata to their previous unitholdings. As with SDLT relief, a claim is required for LBTT relief.

The Welsh authorities intend to introduce a Welsh land transactions tax in 2018, and they have confirmed to us that they are aware of the need to provide for PAIF conversions.

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