Holding commercial property in pension schemes. Could you be due an SDLT refund?

Author

Rohan Manro

A tax adviser, Rohan successfully completed and passed his final CTA examinations (Advisory & Application and Interaction for owner-managed businesses).

A common strategy widely endorsed by professional advisers involved transferring business premises and commercial property into a pension scheme – typically a Small Self Administer Scheme (“SSAS”) or Self Invested Personal Pension scheme (“SIPP”).

Such structures came with a number of tax and commercial advantages of which these included:

  • The SSAS or SIPP could charge a market value rent over the premises to the business free of any income tax allowing the retirement pot to grow tax efficiently
  • The pension fund would retain a valuable asset which could continue to generate a tax efficient income in retirement
  • The property could be sold post-retirement with any gains being free of capital gains tax
  • The property is outside of the business owners estate for IHT purposes and generally protected from any financial creditors

What is the SDLT Position?

In almost all cases, pension trustees and solicitors would recognise that the transfer of property into the pension fund would be an event for SDLT purposes with SDLT becoming payable on the transfer into the pension fund.

However, our view at ETC Tax is that, upon reviewing the legislation in detail it is quite clear that a large number of these cases are likely to have inadvertently paid SDLT where none should have been due. The SDLT legislation is notoriously complicated and it is unsurprising that accepting an SDLT charge was the widely accepted practice of the industry.

How much of a refund may I be entitled to?

This depends on a number of factors but the table below provides an indication of what one might expected:

Transfers before March 2016 Transactions after March 2016
Value of the Property Refund Due Value of the Property Refund Due
£150,000 £0 £0-£150-000 £0
£150-000 – £250,000 £1,500 – £2,500 £150-000 – £250,000 £0 – £2,000
£250,000 – £500,000 £7,500 – £15,000 £250,000 – £500,000 £2,000 – £14,500
£500,000 – £1,500,000 £20,000 – £60,000 £500,000 – £1,500,000 £14,500 – £64,500
£1,500,000 + £60,000 + £1,500,000 £64,500 +

How can we help?

If you have transferred commercial property into a pension scheme, then you may wish to review the position to determine whether you are entitled to a refund. This is something we can assist with and manage the reclaim process with HMRC from start to finish.

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