Earlier this month, the Government launched a consultation on the case for making changes to the rules concerning Stamp Duty Land Tax (SDLT) tax relief on property investment funds.
The consultation is seeking views to help the Government assess the case for making changes to the SDLT treatment of the seeding of property-authorised investment funds (PAIFs). It is also seeking views on the wider SDLT treatment of co-ownership authorised contractual schemes (CoACS), which were announced in this year’s Budget.
The proposed new relief would only apply to PAIFs and potentially to CoACS and would be available for the transfer of both residential and non-residential property. It is designed to apply only to the initial seeding of a PAIF.
The thresholds indicated by HM Revenue & Customs (HMRC), which is concerned that any new relief could be used as tax avoidance, are included as part of a proposed design for a new relief. If taken forward, these are designed to be an anti-avoidance measure.
The plans could limit SDLT relief (when properties are ‘seeded’, or transferred from an existing property portfolio to a new investment structure) to commercial transactions valued above £100m, or residential transactions involving 100 properties or more.
However, there are concerns about the proposed thresholds as they could heavily restrict the application of any new relief and could inhibit the use of PAIFs as early stage investment vehicles.
The consultation is asking questions in order to better understand the property funds industry, the need for change, the likely response from the industry and the wider impact of the proposed changes.
It also sets out proposals for how these changes could be implemented, if the decision is taken to introduce them, and seeks views on their potential design. It closes on 12 September.