SDLTM31320 | RIFs: SDLT consequences of becoming and ceasing to be a RIF

Without provision, RIFs would be transparent for SDLT purposes. This would mean that when a scheme acquires property, the purchase would be made by the underlying investors on a joint and several basis, with the obligation to file a SDLT return and liability for the resulting tax failing on those investors. Additionally, where property is held by a scheme, any change in investors’ proportional entitlements to the scheme property could result in an SDLT charge, for example where new investors joined, or existing investors left the scheme.

To address these issues, RIFs are deemed to be companies for SDLT purposes, with the rights held by investors treated as if they were shares in the company. Where there is an umbrella RIF, then each sub-scheme is treated as a company. This is done by amending section 102A Finance Act 2003 to extend most of the current CoACS treatment for SDLT purposes to RIFs.

This makes RIFs opaque structures for SDLT purposes and ensures that transactions in entitlements or rights within such schemes would not result in any SDLT charge. Responsibility for reporting and paying SDLT upon acquisitions of property fall to the operator of the scheme rather than the investors.