STSM082100 | Trusts and pension schemes: pension schemes: Pension Funds Pooling Schemes - Stamp Duty and Stamp Duty Reserve Tax treatment

The Stamp Duty and Stamp Duty Reserve Tax (SDRT) treatment of pension funds pooling schemes (PFPS) transactions is set out below:

First investor

• Cash contributions as subscriptions for units do not attract a Stamp Duty or SDRT charge as there is no change of beneficial ownership because the manager/trustee holds the assets on trust for the single initial investor.

Subsequent investors

• Cash contributions do not attract a Stamp Duty or SDRT charge. Although the cash contribution dilutes the first investor’s proportionate interest in existing underlying securities, there is no agreement to transfer an interest in chargeable securities, so no charge to SDRT.

• No charge to Stamp Duty arises on contributions of assets to a PFPS because units issued in return are not treated as stock under the Stamp Duty and Stamp Duty Reserve Tax (Pension Funds Pooling Schemes) Regulations 1996 (SI 1996/1584). A letter of direction may be used to frank the SDRT charge arising on the agreement to transfer chargeable securities to a PFPS.

Investors leaving the PFPS

• If units in a PFPS are redeemed or cancelled for cash, there is no transfer on sale or agreement to transfer, hence no charge to Stamp Duty or SDRT respectively arises.

• If there is an in specie redemption, there is a transfer on sale but as the consideration is not regarded as stock, no Stamp Duty charge arises. A letter of direction will frank the SDRT charge arsing on the agreement to transfer chargeable securities to the investor.

Transfer of units between investors within the PFPS

• The PFPS units are not treated as chargeable securities for SDRT purposes so no charge under section 87 FA1986 arises on an agreement to transfer the units.

• The units are not treated as stock or units in a unit trust scheme so are outside the scope of Stamp Duty.