Sipp property investors are being penalised by a rule change made by the Scottish Government, a Sipps firm says.

Suffolk Life has questioned the decision to remove the exemption of Land and Buildings Transaction Tax (LBTT) – the equivalent of stamp duty land tax - from in specie property transfers.

Greg Kingston, Suffolk Life’s head of product & insight, explained that the decision impacts all properties based in Scotland and differs from HMRC’s approach in England, Wales and Northern Ireland where no equivalent tax is levied.

He said: “Revenue Scotland have acknowledged there is concern about their decision, as it is inconsistent with HMRC’s position which it states as “In our view the assumption by the transferee fund or by the trustees of the transferee fund, of obligations to provide benefits is not chargeable consideration”.”

He cited HMRC data which showed that over 10,000 commercial properties have been transacted since the introduction of LBTT in April 2015, and he said it is likely that a proportion of these transactions will have been made with a Sipp.

Revenue Scotland have not yet indicated if the tax will be backdated to apply retrospectively.

Mr Kingston said: “Alongside the 10,000 new transactions it is likely that there are hundreds, if not thousands, of existing Scottish commercial properties already held in Sipps.

"If these investors wish to move their Sipp and property away from a poor Sipps administrator they now may be forced to pay LBTT on top of all other charges or be trapped with their current provider. Sipp investors will certainly think twice about investing in Scottish property following this decision by Revenue Scotland.”

Suffolk Life’s parent firm Curtis Banks Group collectively owns over 7,000 commercial properties across the UK on behalf of Sipp investors.