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HMRC internal manual

Investment Funds Manual

From:
HM Revenue & Customs
Published:
5 July 2019
Updated:
7 March 2022 - See all updates

IFM09810 - Other tax issues: Stamp duty land tax (SDLT)

SDLT is charged on the purchase of land and buildings situated in England and Northern Ireland. Responsibility for property transaction taxes equivalent to SDLT in Scotland and Wales is devolved to their national administrations; more information can be found in the HMRC Stamp Duty Land Tax Manual.

To a large extent, the SDLT treatment for RIFs mirrors that for co-ownership authorised contractual schemes (CoACS), and Chapter 4 of Part 3 of the Regulations mainly amends the existing legislation in Finance Act 2003 so that it also applies to RIFs.

One important provision that is applied to RIFs is the availability of an SDLT seeding relief, so that where conditions are met and restrictions do not apply, a relief will apply to enable a RIF to be ‘seeded’ with chargeable interests in land in return for units in the RIF without a charge to SDLT (SDLTM24700).

Section 102A of Finance Act 2003 provides that for the purposes of SDLT a RIF is a company, and the rights of investors are shares in the company. In that way SDLT is not charged on the investors buying units in a RIF and responsibility for reporting and paying SDLT upon acquisitions of property falls to the RIF operator of the scheme rather than the investors. For further details on SDLT treatment of RIF – see SDLTM31315 onwards.

In addition, Chapter 4 of Part 3 of the Regulations provides some specific rules in relation to RIFs:

  • Regulation 28 is an anti-avoidance provision, needed to address concerns about the ‘enveloping’ of property assets within a RIF (enveloping refers to holding property through a corporate entity) without a charge to SDLT applying (SDLTM31330).
  • Regulation 29 provides for continuing opacity for Stamp Duty Land Tax (‘SDLT’) purposes for co-ownership schemes that cease to be a RIF as a result of ceasing to meet a qualifying condition, continue to be a UK-based AIF, and meet the conditions set out in section 261E(2) and (3) of FSMA 2000 (participation limited to professional or large investors), and that are not an authorised co-ownership scheme.
  • Regulation 30 provides a statutory mechanism for the chargeable interests to revert to the investors upon the scheme exiting the RIF regime or ceasing to be an eligible co-ownership scheme, by deeming there to be a land transaction (SDLTM31325).