Guidance on Land Transaction Tax (LTT) open-ended investment company reliefs.

Organisation:
First published:
5 April 2018
Last updated:

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LTTA/7089 Relief from land transaction tax: conversion of an authorised unit trust to an open-ended investment company

(paragraph 1 of Schedule 19)

A land transaction where a property that is subject to the trusts of an authorised unit trust is transferred to an open-ended investment company, may be relieved from tax if the necessary conditions are met.

The authorised unit trust is referred to as the ‘target trust’ and the open-ended investment company as the ‘acquiring company’.

The relevant conditions are that:

  • the transfer forms part of an arrangement for the conversion of an authorised unit trust to an open-ended investment company, whereby the whole of the available property owned by the target trust becomes the whole of the property of the acquiring company
  • under the arrangement all the units in the target trust are extinguished
  • the consideration under the arrangement consists of or includes the issue of shares (‘the consideration shares’) in the acquiring company to the persons who held the extinguished units
  • the consideration shares are issued to those persons in proportion to their holdings of the extinguished units, and
  • the consideration under the arrangement does not include anything else, other than the assumption or discharge by the acquiring company of liabilities of the trustees of the target trust.

LTTA/7090 Relief from land transaction tax: amalgamation of an authorised unit trust with an open-ended investment company

(paragraph 2 of Schedule 19)

A land transaction where a property that is subject to the trusts of an authorised unit trust is transferred to an open-ended investment company, may be relieved from tax if the necessary conditions are met.

The authorised unit trust is referred to as the ‘target trust’ and the open-ended investment company as the ‘acquiring company’.

The relevant conditions are that:

  • the transfer forms part of an arrangement for the amalgamation of an authorised unit trust with an open-ended investment company, whereby the whole of the available property of the target trust becomes part of (but not the whole) of the property of the acquiring company
  • under the arrangement all the units in the target trust are extinguished
  • the consideration under the arrangement consists of or includes the issue of shares (“the consideration shares”) in the acquiring company to the persons who held the extinguished units
  • the consideration shares are issued to those persons in proportion to their holdings of the extinguished units, and
  • the consideration under the arrangement does not include anything else, other than the assumption or discharge by the acquiring company of liabilities of the trustees of the target trust.

LTTA/7091 Interpretation

(paragraph 3 of Schedule 19)

For the purposes of this relief:

  • “the whole of the available property of the target trust” means all of the property subject to the trusts of the target trust excluding any retained to discharge the liabilities of the trustees of the target trust
  • each of the parts of an umbrella scheme are to be regarded as an authorised unit trust
  • “umbrella scheme” has the same meaning as that section 619 of the Corporation Tax Act 2010
  • an “authorised unit trust” means a unit trust scheme for which an order under section 243 of the Financial Services and Markets Act 2000 is in force.