The simple guide on how to tell if you’ve overpaid Stamp Duty on your SSAS or SIPP pension

Posted 14th February 2022 by ctatax-admin

The Stamp Duty Holiday is over (or at least has been reduced, with the nil rate band chopped from £500,000 to £250,000 until the end of September) and therefore opportunities to save money on your Stamp Duty liabilities are all over, right? 

Well, as it turns out, no. 

This is an issue we have been vocal about in the House Of Lords, and have recently been featured in This Is Money regarding the topic

If you have a Self Invested Personal Pension (SIPP) or a Small Self-Administered Pension (SSAS) into which you have placed commercial property in the last four years, you may find that there is a substantial rebate awaiting you direct from HMRC themselves.

Often, when such transfers are made, it’s to streamline the tax efficiency of both the business and the associated pension fund – the fund takes ‘ownership’ of the property, granting it a sizeable asset, and then continues to collect rent on that asset from the business, growing the asset. So far so good.

However, we have found that many who have undertaken this process have been advised – by lawyers and/or their pension advisers – that they must pay full Stamp Duty Land Tax on the transfer itself, based on the ‘market value’ of the property.

How is this possible?

There is a term in taxation law, ‘connected parties’ which refers, broadly speaking, to people, i.e. human beings are connected to their pension scheme, connected to companies that they control together and, naturally, are connected to their ancestors’ descendants and their spouses’ ancestors or descendants.

In short, family members of married couples are connected to each other and to each other’s companies and pension schemes.

Under Stamp Duty legislation, a transfer between connected parties will attract relief based on the percentage of the property already owned by any members of the transferee.

In the case of a transfer of a commercial property into a SIPP or SSAS pension, the likelihood is that all of the owners of the property will also be members of the pension scheme – hence, the total discount against the Stamp Duty amount which would normally be due on the transfer of the property would be 100%. The Stamp Duty due on the transfer would therefore be nil.

The 3 paradigm situations for Pension Schemes 

It should be stressed that these diagrams only apply to pensions schemes but also apply if the transaction is in either direction. There will be a complete total disregard of any payment made for the properties in these circumstances whether it be by cash, assumption or satisfaction of debt, or any other form of valuable consideration e.g. exchange of property, non-monetary assets, shares, securities, etc.

A Quick Check is to look for the following situations:

Paradigm 1 – Transfer by joint owners of property to multi-member pension scheme 

Transfer to/from a Partnership to a connected Multi-Member Pension Scheme

= SDLT is £Nil (relief available as rules surrounding partnerships apply).

Paradigm 2 – Transfer by sole owners of property to multi-member pension scheme 

Transfer from a connected Individual to a Multi-Member Pension Scheme

= SDLT is £Nil (relief available as rules surrounding partnerships apply).

Paradigm 3 – Transfer by company to multi-member pension scheme or schemes owners all scheme members 

Transfer from a Limited Company to a connected Multi-Member Pension Scheme

= SDLT is £Nil (relief available as rules surrounding partnerships apply).

For most lawyers and financial advisers, not versed in the finer nuances of the SDLT legislation, the assumption is simply that a transfer of property has occurred and therefore SDLT is inevitably payable in full, by default.

Given that many SDLT reliefs on standard property transactions are routinely missed – for example the Multiple Dwellings Relief so often not accounted for and now the subject of numerous reclaims and actions by disgruntled buyers – it really shouldn’t come as too much of a surprise that this particular error is being made.

If your SIPP or SSAS pension has undertaken this kind of transaction, and you paid Stamp Duty on that transfer, then it is highly likely that you have overpaid.