LBTT Tax Relief for OEICs and Unit Trust Conversions in Scotland

LBTT relief for AUT to OEIC fund reorganisations

In Scotland, full LBTT relief may apply when Scottish land is transferred as part of a qualifying reorganisation where an authorised unit trust (AUT) converts into, or merges with, an open-ended investment company (OEIC). The relief is limited to these specific fund restructurings and only applies if strict conditions are met.

• The relief covers land transfers made as part of either an AUT converting into an OEIC or an AUT amalgamating with an OEIC.
• For the relief to apply, all units in the AUT must be extinguished and the AUT’s property must transfer to the OEIC in the way required by the rules.
• Former AUT investors must receive shares in the OEIC in proportion to their previous unit holdings.
• There must be no extra consideration, apart from the OEIC taking on or paying off the trustees’ liabilities.
• If the arrangement includes extra cash, other assets, or does not transfer the whole relevant property, the relief may be lost.
• Even where relief applies, the transaction must still be reported through the normal LBTT return process with Revenue Scotland.

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 in Scotland. It applies where land is transferred as part of restructuring an authorised unit trust into an open-ended investment company, or merging an authorised unit trust into an open-ended investment company. If the conditions are met, the land transfer can be fully relieved from LBTT.

What this rule is about

LBTT is normally charged on land transactions in Scotland. A transfer of Scottish land from one legal owner to another would usually need to be considered for tax.

This relief is aimed at a narrow type of fund reorganisation. It recognises that, in these cases, the land transfer may be part of a regulated investment restructuring rather than an ordinary sale of property. The legislation therefore allows full relief where the transfer happens as part of:

• the conversion of an authorised unit trust, often shortened to AUT, into an open-ended investment company, often shortened to OEIC, or
• the amalgamation of an AUT with an OEIC.

The official source states that the relief is provided by the Land and Buildings Transaction Tax (Open-ended Investment Companies) (Scotland) Regulations 2015, made under section 46 of the LBTT(S) Act 2013. It also points to the definition of an OEIC in section 236 of the Financial Services and Markets Act 2000.

What the official source says

The relief gives full LBTT relief for land transactions transferring property on either:

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

For a conversion of an AUT to an OEIC, the source says all of the following conditions must be met:

• the transfer must form part of arrangements under which the whole of the available property of the target trust becomes 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, the issue of shares in the acquiring company to the persons who held the extinguished units;
• those shares must be issued in proportion to the former unit holdings; and
• the consideration must not include anything else, apart from the acquiring company assuming or discharging liabilities of the trustees of the target trust.

For an amalgamation of an AUT with an OEIC, the source sets out similar conditions, but with one important difference. The whole of the available property of the target trust must become part of the property of the acquiring company, but not the whole of that property. In other words, the OEIC already has property of its own and the AUT’s property is added to it.

The other conditions are the same:

• 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;
• the shares must be issued proportionately; and
• there must be no other consideration, except for assumption or discharge of the trustees’ liabilities.

What this means in practice

The relief is not a general exemption for transfers involving investment funds. It applies only where the transfer is part of a qualifying AUT-to-OEIC reorganisation and the detailed conditions are satisfied.

In practical terms, the main points are:

• the transaction must be part of a wider conversion or amalgamation arrangement, not a standalone property transfer;
• the restructuring must move all of the target trust’s available property in the required way;
• the AUT investors must receive shares in the OEIC in proportion to their previous unit holdings; and
• the arrangement must not include extra consideration, except for the acquiring company taking on or paying off the trustees’ liabilities.

If those conditions are met, the land transfer can qualify for full LBTT relief. If they are not met, the transfer may fall back into the normal LBTT rules.

The requirement that all units are extinguished matters. It shows that the AUT is not simply transferring one asset while otherwise continuing in the same form. The relief is aimed at a full conversion or qualifying amalgamation of the fund structure.

The proportionality condition also matters. It is intended to preserve the investors’ economic position through the restructuring, rather than allowing value to be shifted between participants.

How to analyse it

A sensible way to test whether the relief is available is to work through the arrangement in stages.

• First, identify the parties. Is there an authorised unit trust and an acquiring company that is an OEIC?
• Second, identify the type of reorganisation. Is this a conversion of the AUT into an OEIC, or an amalgamation of the AUT with an existing OEIC?
• Third, check what happens to the AUT’s property. Does the whole of the available property move across as required?
• Fourth, check what happens to the AUT units. Are all units extinguished under the arrangement?
• Fifth, examine the consideration. Are the former unit holders receiving shares in the acquiring OEIC?
• Sixth, check proportionality. Are those shares issued in proportion to the investors’ former unit holdings?
• Seventh, look for anything else of value being given. If there is additional consideration beyond share issue and assumption or discharge of trustee liabilities, the relief may not apply.

The phrase “available property” comes from the official source, but the source does not expand on it. In practice, the exact scope of what must transfer will need to be tested against the governing arrangements and the relevant legal framework for the fund.

The source also says that to claim the relief, the taxpayer should follow Revenue Scotland’s guidance on making an LBTT return and paying tax. So even where relief is available, the transaction still needs to be dealt with through the LBTT filing process in the normal way.

Example

This is an illustration based on the conditions in the source.

An authorised unit trust holds Scottish land as part of its investment portfolio. The fund is restructured so that the whole of the trust’s available property is transferred to an OEIC. All units in the AUT are extinguished. The former unit holders receive shares in the OEIC in exactly the same proportions as their previous unit holdings. No cash or other assets are paid to them, although the OEIC takes on the trustees’ liabilities.

On those facts, the transfer of the Scottish land is the kind of transaction the relief is designed to cover, and full LBTT relief should be available if all statutory conditions are met.

By contrast, if some investors received extra cash or other property as part of the arrangement, that would need careful review because the source says the consideration must not include anything else, apart from the assumption or discharge of trustees’ liabilities.

Why this can be difficult in practice

The rule looks straightforward, but several points can become technical.

First, the relief depends on the transfer being part of a particular kind of fund reorganisation. Labels alone are not enough. The legal documents must show that the arrangement really is a qualifying conversion or amalgamation.

Second, the source requires the whole of the available property of the target trust to move across. If any part of the property is carved out, retained, or dealt with separately, that may affect whether the condition is met.

Third, the condition on consideration is strict. Extra payments, side arrangements, or non-share benefits may jeopardise relief unless they fall within the narrow exception for assumption or discharge of trustee liabilities.

Fourth, proportionality must be checked carefully. If the share issue does not match the former unit holdings, the relief conditions may fail even if the transaction is commercially similar to a qualifying reorganisation.

Finally, this is a specialist relief tied to specific regulations. The source gives only the core conditions. It does not answer every interpretive question that may arise in a complex fund restructuring.

Key takeaways

• This is a full LBTT relief for land transfers that form part of a qualifying AUT-to-OEIC conversion or AUT-with-OEIC amalgamation.
• The conditions focus on a complete restructuring: all units must be extinguished, investors must receive OEIC shares proportionately, and there must be no extra consideration apart from assumption or discharge of trustee liabilities.
• The relief must still be claimed through the LBTT return process, and the exact legal structure of the arrangement matters.

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 for OEICs and Unit Trust Conversions in Scotland

View all LBTT Guidance Pages Here