LBTT Tax Relief Guidance for OEICs and Authorised Unit Trust Conversions

LBTT relief for AUT to OEIC conversions and mergers

Full LBTT relief may apply where Scottish land is transferred as part of a regulated fund reorganisation involving an authorised unit trust (AUT) and an open-ended investment company (OEIC). The relief is limited to qualifying conversions of an AUT into an OEIC or mergers of an AUT into an existing OEIC, and the statutory conditions must be followed closely.

• The relief only covers two specific cases: an AUT converting into an OEIC, or an AUT merging with an OEIC.
• In a conversion, all of the AUT’s available property must become all of the acquiring OEIC’s property; in an amalgamation, it must become part of the OEIC’s property.
• All units in the AUT must be extinguished, and former unit holders must receive shares in the OEIC in proportion to their previous holdings.
• No extra consideration is allowed, except for the OEIC taking on or discharging the trustees’ liabilities.
• The relief depends on the legal structure and transaction documents, so side payments, extra steps, or unusual terms may prevent relief from applying.

Scroll down for the full analysis.

LBTT relief when an authorised unit trust converts into, or merges with, an OEIC

This page explains a specific Land and Buildings Transaction Tax relief for certain fund reorganisations. It applies where land is transferred as part of converting an authorised unit trust into an open-ended investment company, or as part of merging an authorised unit trust into an existing open-ended investment company. If the conditions are met, the land transfer can qualify for full relief from LBTT.

What this rule is about

Normally, transferring Scottish land can trigger LBTT. That can be a problem in fund restructurings, because the land may be moving within a regulated investment reorganisation rather than being sold in an ordinary commercial sense.

The regulations referred to in the official guidance create a full relief for certain transfers involving:

• an authorised unit trust, often abbreviated to AUT, and
• an open-ended investment company, often abbreviated to OEIC.

The relief is aimed at two situations:

• the AUT is converted into an OEIC, so the trust structure is replaced by the company structure, or
• the AUT is amalgamated with an OEIC, so the AUT’s property moves into an existing OEIC.

The official source also notes that OEICs are defined in section 236 of the Financial Services and Markets Act 2000. That matters because this is not a general relief for any collective investment vehicle. It is tied to these specific regulated structures.

What the official source says

The official guidance says that the relief gives full LBTT relief on land transactions transferring property as part of:

• the conversion of an AUT to an OEIC, or
• the amalgamation of an AUT with an OEIC.

For a conversion, the conditions include the following:

• the transfer must form part of arrangements to convert the AUT into an OEIC;
• the whole of the available property of the target trust must become the whole of the property of the acquiring company;
• all units in the target trust must be extinguished;
• the consideration must consist of, or include, shares in the acquiring company issued to the former unit holders;
• those shares must be issued in proportion to the former unit holders’ holdings; and
• there must be no other consideration, apart from the acquiring company assuming or discharging liabilities of the trustees of the target trust.

For an amalgamation, the conditions are similar, but with one important structural difference:

• the whole of the available property of the target trust must become part, but not the whole, of the property of the acquiring company.

The other conditions remain the same: all units are extinguished, consideration shares are issued proportionately to former unit holders, and there must not be additional consideration other than the assumption or discharge of trustees’ liabilities.

What this means in practice

This is a narrowly framed reconstruction relief. It is not enough that land moves from an AUT to an OEIC. The transfer must happen as part of a qualifying arrangement, and the arrangement must match the statutory pattern closely.

The practical points are:

• the transaction must involve a genuine conversion or amalgamation of the kind described in the regulations;
• the unit holders in the AUT must receive shares in the OEIC in proportion to what they previously held;
• the old units must disappear entirely; and
• there must not be extra value extracted through separate or additional consideration, except for the OEIC taking on or settling the trustees’ liabilities.

If those conditions are met, the land transfer can be relieved in full from LBTT. If they are not met, the transfer may fall back into the normal LBTT rules.

The distinction between conversion and amalgamation matters. In a conversion, the AUT’s whole available property becomes the whole property of the acquiring company. In an amalgamation, the AUT’s whole available property becomes only part of the acquiring company’s property, which implies that the acquiring OEIC already has other property.

How to analyse it

A sensible way to test whether the relief is potentially available is to work through these questions.

• Is the transfer part of an arrangement involving an authorised unit trust and an OEIC?
• Is the arrangement properly characterised as a conversion, or as an amalgamation?
• Does the whole of the available property of the target trust move across in the way required by the relevant limb of the relief?
• Are all units in the target trust extinguished under the arrangement?
• Do the former unit holders receive shares in the acquiring company?
• Are those shares issued in proportion to their former unit holdings?
• Is there any consideration other than those shares and the assumption or discharge of trustees’ liabilities?

That last question is especially important. The official wording is restrictive. If there is additional consideration beyond what the regulations allow, the relief may not be available.

It is also important to identify the “target trust” and the “acquiring company” clearly from the transaction documents. The relief depends on the legal structure of the arrangement, not just on its commercial description.

Example

An authorised unit trust holds Scottish land as part of its investment property. A reorganisation is carried out so that the trust is converted into an OEIC. Under the arrangement, all of the AUT’s available property passes to the OEIC. All units in the AUT are extinguished. The former unit holders receive shares in the OEIC in the same proportions as their former unit holdings. The OEIC also takes over the trustees’ liabilities, and no other consideration is given.

On the facts described in the official guidance, that is the type of arrangement the relief is intended to cover, so the land transfer can qualify for full LBTT relief.

Why this can be difficult in practice

The official guidance is short, but the conditions are precise. Several points can become fact-sensitive.

First, the relief depends on the transfer being part of an arrangement for a qualifying conversion or amalgamation. If the restructuring includes extra steps, side payments, or assets moving in a different way from the statutory model, it may be unclear whether the arrangement still fits the relief.

Second, the proportionality requirement matters. The shares in the acquiring company must be issued to the former unit holders in proportion to their extinguished units. Any departure from that pattern may create a problem.

Third, the rule about consideration is narrow. The regulations allow the assumption or discharge of trustees’ liabilities, but otherwise the arrangement must not include anything else as consideration. In practice, this means transaction documents should be checked carefully for cash balancing payments, side agreements, or other value transfers.

Fourth, the distinction between conversion and amalgamation should not be treated casually. The property outcome must match the relevant category. If the acquiring company ends up with all the transferred property as its whole property, that points towards conversion. If the transferred property becomes only part of the acquiring company’s property, that points towards amalgamation.

The official source does not explore edge cases, so where the facts are unusual, the analysis depends heavily on the exact legal steps and documentation.

Key takeaways

• This is a full LBTT relief for specific AUT-to-OEIC reorganisations, not a general exemption for fund transfers.
• The conditions are strict: all units must be extinguished, consideration shares must be issued proportionately, and there must be no extra consideration apart from taking on or settling trustees’ liabilities.
• The legal structure of the arrangement matters, especially whether it is properly a conversion or an amalgamation.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: LBTT Tax Relief Guidance for OEICs and Authorised Unit Trust Conversions

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