Pension Schemes - Stamp Duty, Stamp Duty Reserve Tax (SDRT) and Stamp Duty Land Tax (SDLT)

Q: Do SDRT, stamp duty or SDLT arise on the transfer of assets and liabilities between pension schemes where the only consideration is the assumption by the receiving scheme of the obligation to pay pension benefits?

A: Where, on the merger of pension schemes or on other transfers of assets between such schemes, the only consideration for the transfer of assets from the transferring scheme to the receiving scheme is the assumption by the receiving scheme of the obligation to pay pension benefits (and any other benefits permitted to be provided by Inland Revenue approved pension schemes) to the former members of the transferring scheme:

1. No charge to SDRT will arise. This will be the case whether or not the assets of the transferring scheme consist of or include units or shares in a UK unit trust or open-ended investment company. There is no consideration in money or money’s worth for SDRT purposes and therefore no charge arises under section 87 FA 1986 or Schedule 19 FA 1999.

Notwithstanding the absence of a Schedule 19 charge to SDRT, where units or shares in a UK unit trust or open-ended investment company are transferred in such a way that a change of ownership needs to be recorded in the unit or share register, the fund manager will need to report as a third party exemption the number of units or shares surrendered on his monthly SDRT Notice. The fund manager will also need to retain sufficient evidence to support the third party exemption in the event of an inspection by the Inland Revenue.

2. No ad valorem stamp duty will arise in respect of the agreement for the transfer of assets from the transferring scheme to the receiving scheme because the assumption of the liability by the trustee of the receiving scheme to provide pension benefits to members of the transferring scheme is not chargeable consideration for stamp duty purposes. However, all transfer documents or other instruments executed on or before 12 March 2008 that give effect to the transfer of stock or marketable securities from the transferring scheme to the receiving scheme are liable to a fixed duty of £5. (Fixed duties were abolished for documents executed on or after 13 March 2008).

3. No charge to SDLT will arise on any transfers of land from the transferring scheme to the receiving scheme because there is no agreement to transfer land for consideration in money or money’s worth.

PN051040084