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Pension funds seek stamp duty holiday on pooled investments

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Council pension funds could face a large tax bill as a direct result of the government’s pooling initiative.

Local Government Pension Scheme funds must form eight collective investment pools by April 2018. The government has said it expects funds to transfer all of its investments to their pools unless there is a clear value for money argument against doing so.

However, fund officers are concerned they will be charged stamp duty on their property holdings if they move them into pools.

Denise Le Gal (pictured), chair of the Brunel Pension Partnership, said the issue is a concern for the ten LGPS funds in her pool.

“By transitioning some of our assets and putting them into the pool, we’re doing what the government has asked but if we do it, we incur stamp duty on property,” she said. This is because the legal owner of the asset will change from the fund to the pool.

Ms Le Gal said pension funds had written to the Treasury and the Department for Communities & Local Government to ask for a stamp duty holiday on transfers of property into the pools.

However, she added: “We got bog-standard replies; the same reply came from DCLG as the Treasury.”

Ms Le Gal said she and Tameside pension fund chair Kieran Quinn (Lab) had since raised the issue with Marcus Jones, who she said understood the issue.

“No-one is saying once we’re pooled, and we dispose of an asset and buy another, that we won’t pay the stamp duty – of course we will – but that’s different,” she said.

The LGPS is worth £217bn, of which 5.5% or around £1.2bn was invested in property in various forms, at the time of the LGPS Advisory Board’s 2016 annual report.

John Burns, chief operating and financial officer at the LGPS Central pool, said: “We’re working closely with advisors and HMRC to make sure whatever we do minimises the tax implications for our pension funds.”

He said that because the vehicles through which council pension funds will pool – authorised contractual schemes – are new and relatively untested, there are “lots of tax implications to consider”, extending beyond property assets. For this reason, Mr Burns said any calculation of the total taxes that could be levied on the scheme as a result of pooling transfers would be “meaningless” at this point.

Jeff Houston, head of pensions at the Local Government Association, confirmed that stamp duty would be due on any transfer of ownership of property at the moment.

“There is seeding relief for when property is transferred into a shared ownership such as an authorised contractual scheme,” said Mr Houston.

“But [the relief] is time limited. From the moment of setting up a sub-fund for property [within a pool] there is a limited amount of time to transfer it in. Everyone who wanted to move property would have to do it now,” Mr Houston said.

He said the LGA and the cross-pool collaboration working group have asked for meetings with HMRC and the Treasury to negotiate a solution.

“We are looking to sit down and say, [HMRC has] designed this relief to get property into an ACS, the Treasury has designed ACSs to hold property in a pool, but we need to get both to work. We are trying to get Treasury and HMRC together in a room,” he said.

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