Land and Buildings Transaction Tax: Property Investment Funds
Co-Ownership Authorised Contractual Schemes - Proposed Amendments
This consultation seeks views on draft legislation concerning the interaction of CoACS and LBTT. The aim of the consultation is to ensure that the proposed amendments work as intended prior to the legislation being laid before the Scottish Parliament.
The rationale for the introduction of this legislation is to support investment in Scottish property, streamline the tax treatment of property assets in CoACS funds across the UK, reduce administration for operators and reduce tax complexity for taxpayers.
The draft clauses for consideration are set out in Annex A of the consultation document. The draft legislation proposes a new paragraph 9 of Schedule 1 of the Land and Buildings Transaction Tax (Scotland) Act 2013 (“The Act”).
The overall intended effect is to treat certain transactions by CoACS as exempt transactions under Schedule 1 of The Act, namely the transfer of units within the scheme where property is held as an underlying asset of those units.
This is achieved by treating the scheme itself as a company and the units as shares in a company, reflecting the current treatment of CoACS under SDLT and LTT to ensure consistency across the UK as far as possible.
The draft legislation relies on various definitions set out in the Financial Services and Markets Act 2000 (FSMA). This approach ensures a consistent approach across the UK, providing certainty for scheme operators.
In defining a CoACS, the draft legislation refers to section 261D of FSMA, which sets out the requirements that must be met for a co-ownership scheme to be considered authorised. In addition, the definition of a ‘co-ownership scheme’ relies on that set out under section 235A of FSMA. The overall intended effect is that the proposed exemption will only apply to those schemes which are authorised and regulated by the Financial Conduct Authority.
The draft legislation also sets out the requirements to be met by the scheme participants and operator under the broader LBTT Act. These terms are defined in sections 235 and 237 of FSMA respectively.
The draft legislation also defines “umbrella CoACS” and sets out the application of relief to sub-schemes within that umbrella CoACS.
While the proposed exemption seeks to treat CoACS’ as companies in certain transactions, the draft legislation clarifies that this treatment does not extend to the application of Group Relief under Schedule 10 and Reconstruction Relief and Acquisition Relief under Schedule 11 of the LBTT Act.