Revenue Scotland confirms tax ruling for transfer of property in specie between pension schemes

The pensions industry has been anxiously awaiting clarification from Revenue Scotland on the treatment of in specie transfers of Scottish property between registered pension schemes.
 
In its October 2016 Technical Bulletin 1, Revenue Scotland published a brief statement to clarify its view of the treatment for Land and Buildings Transaction Tax (LBTT) purposes of in specie transfers between such schemes. The tax authority’s view was that these transactions would generally give rise to an LBTT charge because:

• they are transactions in land, and
• the assumption of liability to provide retirement and/or death benefits to beneficiaries by the receiving pension scheme  is debt as consideration.

LBTT applies to commercial land and buildings transactions (including commercial purchases and commercial leases) where a chargeable interest is acquired. It was introduced in Scotland on 1 April 2015 and replaced Stamp Duty Land Tax (SDLT).
 
An in specie transfer of property between registered pension schemes is a transaction in which a pension scheme acquires property and is subject to LBTT where there is chargeable consideration in the same way as any other transaction. There are no special rules that apply to pension schemes and Revenue Scotland’s LBTT legislative guidance therefore does not make specific reference to them.
 
Nevertheless, because of ongoing representations on the matter since October 2016, Revenue Scotland has now changed its stance. In LBTT Technical Bulletin 3, dated 28 December 2017, it has stated that 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. However, any consideration given in the form of money or money’s worth for the transfer of the properties will still be chargeable to LBTT.
 
This view applies both prospectively and retrospectively and Revenue Scotland will consider claims to repayment of tax from any taxpayers who have filed and paid LBTT based on the view as stated in its October 2016 bulletin. Schemes can make claims by amending a previously submitted return, if within time to do so, or through written correspondence in accordance with the online guidance on making a claim under section 107 of The Revenue Scotland and Tax Powers Act 2014 provided at RSTP7003.