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provided that, without these provisions, no SDLT would arise to the scheme.
As previously proposed, the legislation introduces:
a) A defined "Seeding Period" within which seeding transactions are eligible for relief. The Seeding Period will begin upon the initial transfer of property into the portfolio and end either with the first third-party investment or after 18 months. This will allow property to be seeded in multiple tranches, in recognition of the difficulties associated with seeding a large property portfolio in one go.
b) A portfolio test set at a minimum value of £100m of seeded property. This must comprise:
i) at least 10 non-residential properties, or
ii) 100 residential properties.
In the case of funds with a mix of residential and non-residential property, a percentage test will apply. This means that if the total value of residential property seeded is less than or equal to 10% then the non-residential requirements must be met. If the total value of residential property seeded is greater than 10% it is the residential requirements that must be met. This means that where a predominantly non-residential fund has a 'residual' amount of residential property, it is still the non-residential requirements that need to be met.
c) A clawback mechanism to apply to recover the SDLT relieved where certain circumstances arise in a "Control Period" that runs from three years following the end of the Seeding Period. These circumstances are:
i) The fund ceases to be a PAIF / CoACS or the genuine diversity of ownership test is failed (see more on this below);
ii) The portfolio test is not met;
Firstly, the Finance Bill introduces a new relief from ATED to apply where an interest is held in UK residential property exclusively for the purposes of entering into an equity release scheme, specifically a regulated home reversion plan.
Secondly, it introduces new relief from ATED where a property (a single-dwelling interest) is occupied either by an employee of a qualifying property rental business or where a tenants' management company permits one of the flats in the building to be occupied by a person employed to act as caretaker of the premises.
PAIFs and TTFs
The proposed introduction of seeding relief from Stamp Duty Land Tax was covered in our analysis of the Autumn Statement. This can be found here.
The draft Finance Bill provisions were published in November and were covered in our newsletter here. The draft provisions were opened for consultation to which industry bodies and others responded.
The final provisions are set out in Schedule 16 of this Finance Bill. The provisions provide relief from SDLT for real estate assets contributed in kind to Property Authorised Investment Funds (PAIFs) and Tax Transparent Funds in the form of Co-ownership Authorised Contractual Schemes (CoACS). The legislation also includes provisions that a non-UK collective investment scheme will be treated as a CoACS for SDLT purposes if it:
a. is constituted by a contract under the law of an EEA State other than the UK,
b. has a manager incorporated under the law of an EEA State, and
c. is equivalent to a CoACS under the law of the EEA State,