SDLTM31335 | RIFs: Further implications when an unauthorised contractual scheme enters the RIF regime

When an SDLT entry charge arises under Regulation 28 (because a UCS enters the RIF regime whilst holding chargeable interests), the scheme cannot begin operating as a RIF until an entry notice has been given to HMRC. This means that the ability to submit an entry notice up to 3 months after a scheme begins operating as a RIF is disapplied where an entry charge applies. This is to prevent problems arising with late filing penalties arising due to the 14-day return deadline for submitting an SDLT return

Regulation 23(4) — where a Regulation 28 entry charge applied to a scheme and HMRC determines under Regulation 23 that the entry notice for the scheme should be treated as if it had never been given, Regulation 23(4) saves the Regulation 28 land transaction (which means that the SDLT charged, along with any interest or penalties that may have applied in relation to the transaction will remain within charge and will not be repaid),

There is also a statutory mechanism for the chargeable interests to revert to the investors without an SDLT charge. There will be a deemed land transaction, being the acquisition of the chargeable interests, by the participants in the scheme. However, any consideration will be disregarded, and the transaction will not be notifiable for the purposes of SDLT.