The Royal County of Berkshire Pension Fund has shelved plans for a wholly owned property subsidiary over the devolution of greater tax powers to Scotland.
The £1.6bn (€1.9bn) local authority fund was previously considering the launch of a Scottish Limited Partnership to hold its private rented sector (PRS) housing assets as it built up a portfolio, but it abandoned the idea earlier this month.
Nick Greenwood, pension fund manager for the Royal Borough of Windsor & Maidenhead, said the limited partnership idea was dropped after the UK government promised the Scottish parliament greater tax-raising powers in the wake of 2014’s unsuccessful independence referendum.
In a document tabled at the fund’s most recent pensions committee, Greenwood said representatives for the pension fund and the council’s head of finance agreed that the “small risk” of loss of tax transparency for the limited partnership – “the possibility the income received in a Scottish Limited Partnership would be taxed in Scotland” – outweighed any benefits Berkshire might gain from setting up the company.
“Accordingly,” the document states, “the Council were advised that the fund would not be requesting them to set up a Scottish Limited Partnership to hold its private rented residential investments.”
The Scottish parliament currently has limited tax-raising powers and is able to vary the rate of income tax charged by 3 percentage points.
Under legislation currently being debated, the devolved assembly would be granted more significant powers, including over income tax rates and air passenger duties.
The decision has not halted Berkshire’s acquisition of PRS assets.
Greenwood confirmed in the same report that the fund bought a 70% stake in an apartment block in the town of Wokingham for £5.7m.
Greenwood’s report said the building consisted of 40 flats, all of which were rented, and that the fund was expecting to yield 4% from its investment by next year.
The fund was recently involved in talks with two neighbouring boroughs that would have seen the merger of the three local government pension funds (LGPS).
However, Berkshire’s most recent business plan said it still hoped to reduce costs through “co-operative working with other LGPS funds” over the course of 2015-16.