In July 2014, HMT and HMRC launched a consultation on potential changes to the way transactions in units are treated for SDLT purposes to ensure that certain vehicles are more attractive for investment in property

Stamp duty land tax (SDLT) arises on the purchase or transfer of property in the UK for amounts above a certain threshold. The amount owed depends on the value of the transaction as well as considerations such as the nature of the interest (whether freehold or leasehold) and the use of the property (whether residential or not).

It has been suggested that offering reliefs from SDLT in certain circumstances could encourage more property funds to set up in the UK, which would facilitate greater collective investment in UK property. The purpose of this consultation, run by HMT and HMRC, is to discuss whether and how changes could be made to the way transactions in units are treated for SDLT purposes to ensure that certain vehicles, referred to as property authorised investment funds (PAIFs) and co-ownership authorised contractual schemes (CoACSs), are more attractive for investment in property.

We agree that units, or tranches of beneficial ownership, in PAIFs and CoACSs should be treated as interests, separate from the underlying beneficial ownership of the property owned by the PAIF or CoACS itself. It is not sensible to treat these units as a fragment of beneficial ownership of the underlying real property. But we think that, for both PAIFs and for CoACSs, the regime should be similar to that contained in Schedule 15 FA 2003 (ie, the regime which relates to partnerships).

It appears that one of the problems of Part 1 of Schedule 15 of FA 2003 which identifies beneficial ownership of property held by a partnership with the partners is one of the reasons for this consultation document. However, we submit that any ambiguity that a unit holder in a PAIF or CoACS has a beneficial interest in the underlying property should be specifically legislated as suggested.

Parts 2 and especially Part 3 of Schedule 15 FA 2003 impose a regime on partnerships which identifies a partnership share as an interest in the partnership itself rather than in the underlying beneficial interest in the land. We believe that these Part 3 provisions should be followed for PAIFs and CoACSs. They comprise a code which is by now reasonably familiar to SDLT practitioners, such that following this approach would allow this expertise to be transposed to the PAIF-CoACSs context.

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