SDLTM24750 - Withdrawal of Relief: Ceasing to Qualify as PAIF/CoCS
A ‘relevant transaction’ will be subject to withdrawal of seeding relief if a fund/purchaser ceases to be a PAIF/CoCS:
at any time between the effective date of such a transaction and the end of the seeding period, or
at any time in the ‘control period’, or
in pursuance of, or in connection with arrangements made before the end of the ’control period’.
‘Relevant transaction’ refers to a transaction where seeding relief has been allowed.
‘Control period’ means the period of 3 years beginning with the day following the last day of the seeding period.
Relief is withdrawn if, and only if, the purchaser ceases to be a PAIF/CoCS and the purchaser holds:
the chargeable interest that was acquired under the ‘relevant transaction’, or
a chargeable interest derived from such an interest.
Where relief is withdrawn because the purchaser ceases to qualify as a PAIF/CoCS, the amount of SDLT payable is that amount that would have been paid but for the relief, or an ‘appropriate portion’ of the relief.
The value of the ‘appropriate portion’ is determined by comparing the subject matter of the ‘relevant transaction’ and what property is owned by the scheme at the time it ceases to be a PAIF/CoCS.
Example 1
On 1 September 2023, PAIF Alpha acquires major interests in a portfolio of non-residential properties and issues the vendor units in the PAIF in consideration for the properties. PAIF Alpha claims seeding relief. This is the ‘first property seeding date’ as it meets all the basic conditions for seeding relief. On 1 February 2024, PAIF Alpha ceases to be authorised by the FCA. PAIF Alpha still holds the non-residential properties acquired in September 2023, however this transaction is now subject to SDLT as the full amount of relief claimed is withdrawn.
Example 2
On 30 December 2023, PAIF Bravo acquires major interests in a portfolio of residential properties for £500 million and issues the vendor units in the PAIF in consideration for those properties. PAIF Bravo claims seeding relief. This is the ‘first property seeding date’ as it meets all the basic conditions for seeding relief. On 1 April 2024, the PAIF sells half of the properties to an unconnected third party on an arm's length basis. On 1 July 2024, the PAIF ceases to be authorised by the FCA. PAIF Bravo still holds 50% of the properties acquired in December 2023. Relief is withdrawn in respect of the 50% of the property which has not be sold and is retained.