LBTT3023 - Circumstances where alternative finance investment bonds relief is not available when the bond-holder acquires control of underlying asset

Relief for alternative finance investment bonds (covered in LBTT3021) is not available on the first or the second transaction if control of the underlying asset is acquired by either the bond-holder or a group of connected bold-holders.

A bond-holder or group of connected bond-holders acquires control of the underlying asset if:

• the rights of the bond-holder under an alternative finance investment bond include the right of management and control of the assets; and
• the bond-holder, or the group, acquires sufficient rights to enable them, or members of the group acting jointly, to exercise the right of management and control of the bond assets to the exclusion of any other bond-holders.

Relief in relation to the first transaction is not available if the bond-holder or the group acquires control of the underlying asset within 30 days of the effective date of the transaction.

Relief in relation to the first transaction is treated as withdrawn if the bond-holder or the group acquires control of the underlying asset at any time after the 30 day period following the effective date and conditions A to C have been met.

LBTT(S)A 2013 schedule 8 paragraph 24

However, if control of the underlying asset is acquired by either the bond-holder or a group of connected bold-holders, but either of the following two instances applies, AFIB relief is still available:

The first instance is:

• at the time that the rights were acquired, the bond-holder or all connected bond-holders did not know and had no reason to suspect that the acquisition enabled the exercise of the right of management and control of the bond assets to the exclusion of other bond-holders; and
• as soon as reasonably practicable after the bond-holder or any other bond-holders becomes aware that the acquisition enables that exercise, the bond-holder or some or all the bond-holders transfer sufficient rights for that exercise no longer to be possible.

The second instance is where the bond-holder:

• underwrites a public offer of rights under the bond; and
• does not exercise the right of management and control of the bond asset.

‘Underwrite’ in relation to an offer of rights under the bond means to agree to make payments of capital under the bond in the event that other persons do not make those payments.

LBTT(S)A 2013 schedule 8 paragraph 25