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Revenue Scotland LBTT Legislation Guidance; Date of publication: 15.02.2015

LBTT1000 Land and Buildings Transaction Tax Legislation Guidance Land and Buildings Transaction Tax (LBTT) is a tax on transactions in land situated in Scotland. LBTT replaces Stamp Duty Land Tax (SDLT) from 1 April 2015. LBTT applies to standard house purchases and to other types of land transaction as described throughout this guidance. If a land transaction has an effective date before 1 April 2015, the SDLT regime may

still apply – separate guidance is available covering transitional arrangements for

SDLT and LBTT.

LBTT is a self-assessed tax and it is the responsibility of the taxpayer to complete and submit an accurate LBTT return, where required, and pay any tax due. The tax is charged regardless of whether there is a document setting out the terms of the transaction, whether any document was executed in Scotland and whether any party to the transaction was present or resident in Scotland at the effective date of the transaction. This LBTT guidance is intended to supplement and clarify the detail contained in the Land and Buildings Transaction Tax (Scotland) Act 2013 and supporting subordinate legislation, including:

The Land and Buildings Transaction Tax (Addition and Modification of Reliefs) (Scotland) Order 2015; (Note: This is currently draft legislation)

The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014;

The Land and Buildings Transaction Tax (Ancillary Provision) (Scotland) Order 2014;

The Land and Buildings Transaction Tax (Definition of Charity) (Relevant Territories) (Scotland) Regulations 2014;

The Land and Buildings Transaction Tax (Prescribed Proportions) (Scotland) Order 2014;

The Land and Buildings Transaction Tax (Qualifying Public or Educational Bodies) (Scotland) Amendment Order 2014;

The Land and Buildings Transaction Tax (Sub-sale Development Relief and Multiple Dwellings Relief) (Scotland) Order 2015; and (Note: This is currently draft legislation)

The Land and Buildings Transaction Tax (Tax Rates and Tax Bands) (Scotland) Order 2015. (Note: This is currently draft legislation)

https://www.gov.uk/government/publications/transitional-land-and-building-transaction-tax-guidance

https://www.gov.uk/government/publications/transitional-land-and-building-transaction-tax-guidance

http://www.legislation.gov.uk/asp/2013/11/contents

http://www.legislation.gov.uk/sdsi/2015/9780111025758/contents


http://www.legislation.gov.uk/ssi/2014/375/contents/made












http://www.legislation.gov.uk/sdsi/2015/9780111026359



The guidance is structured as follows:

Chapter 1: How the tax works – LBTT1001

Chapter 2: Determining the chargeable consideration – LBTT2001

Chapter 3: Determining whether tax is payable: Exemptions and reliefs – LBTT3001

Chapter 4: Payment of tax and making a LBTT return – LBTT4001

Chapter 5: Rules for particular transactions and bodies – LBTT5001

Chapter 6: Leases – LBTT6001

Chapter 7: Partnerships – LBTT7001

Chapter 8: Trusts – LBTT8001

Chapter 9 – Keeping and preserving records – LBTT9001

LBTT Worked Examples Separate guidance is also available covering:

'How to make a LBTT return and pay tax' (note: there are two versions of this guidance – one for returns made online and one for returns made by paper);

'How to amend a LBTT return';

'How to sign up to the LBTT Online Portal'; and

The Revenue Scotland and Tax Powers Act 2014. That guidance, amongst other things, provides important information on our investigatory powers, penalties, interest, debt enforcement and dispute resolution arrangements (review, mediation and appeal). References to that guidance take the form ‘RSTPXYYY’ where X is the chapter reference and YYY is the unique guidance reference within that chapter.

All references in this guidance to:

the ‘filing date’ for a LBTT return have the meaning as defined in section 82 of the RSTPA 2014: the ‘date by which that return requires to be made by or under any enactment’;

‘LBTT(S)A 2013’ mean the Land and Buildings Transaction Tax (Scotland) Act 2013;

https://www.revenue.scot/land-buildings-transaction-tax/guidance/lbtt-legislation-guidance/worked-examples

https://www.revenue.scot/land-buildings-transaction-tax/guidance/how-to



https://www.revenue.scot/legislation/rstpa-legislation-guidance

http://www.legislation.gov.uk/asp/2014/16/section/82/enacted





‘RoS’ mean Registers of Scotland (or more specifically, the Keeper of the Registers of Scotland);

‘RSTPA 2014’ mean The Revenue Scotland and Tax Powers Act 2014; and

‘we’, ‘us’ or ‘our’ mean Revenue Scotland. ‘We’, ‘us’ or ‘our’ also mean Registers of Scotland where it is carrying out a function delegated to it by us under section 4 of the RSTPA 2014.

Note: All links to the www.legislation.gov.uk website are provided for ease of reference but you should be aware that the content displayed may not always reflect the most up-to-date legislation and we therefore take no responsibility for your reliance on it.

http://www.ros.gov.uk/

http://www.legislation.gov.uk/asp/2014/16/contents/enacted


http://www.legislation.gov.uk/


LBTT1001 How the tax works The guidance in this chapter is set out as follows:

What is a land transaction – LBTT1002

Acquisition and disposal of chargeable interest - LBTT1003

The effective date - LBTT1004

Contract and conveyance - LBTT1005

Contract providing for conveyance to third party - LBTT1006

Options and rights of pre-emption - LBTT1007

Flowchart of LBTT transaction – LBTT1008


LBTT1002 What is a land transaction A land transaction occurs when someone acquires a chargeable interest in land. All references to land in this guidance should be taken as to also include buildings situated on land, unless specifically stated otherwise. A standard house purchase is a land transaction, as are commercial and agricultural transactions falling within the statutory description. Chargeable interests A chargeable interest is a real right (that is to say, a right which is enforceable against everyone, not just one person) or other interest in or over land in Scotland. A chargeable interest is also the benefit of an obligation, restriction or condition affecting the value of such a right or interest over land in Scotland. The definition is very broad and captures more than the real rights in land known to Scots law; accordingly, for example, options in relation to land (see LBTT1007) and interests in property-holding partnerships (see LBTT7011) are chargeable interests. A chargeable interest is an interest in land, so this would not include an interest in relation to moveable property such as fittings (e.g. curtains, carpets and furniture), boats or artwork. When it comes to determining the chargeable consideration, permanent fittings such as fitted kitchens and bathroom appliances are included in the determination of the chargeable consideration – see LBTT2002. Items not included in the chargeable consideration are outlined in LBTT2009. Land in Scotland does not include land below the low water mark. It does however include jetties and similar structures with one end attached to land in Scotland. It also includes land under water above the low water mark, for example lochs and rivers. LBTT(S)A 2013 sections 3 and 4 Exempt interests Exempt interests are interests that are not chargeable to LBTT. They include a security interest, such as a standard security. A standard security is held for the purpose of securing a monetary payment or performance of any other obligation. LBTT(S)A 2013 section 5 Subject to certain rules (see LBTT3017), an interest held by a financial institution either on its own or jointly with someone in connection with an alternative property finance arrangement is an exempt interest.

http://www.legislation.gov.uk/asp/2013/11/part/2/chapter/1/enacted



LBTT1003 Acquisition and disposal of chargeable interest The liability to pay LBTT in respect of a chargeable transaction rests with the buyer. The buyer in relation to a land transaction is the person(s) who acquires (or is a party to the acquisition of) the subject-matter of the transaction in return for a consideration (i.e. payment is given to acquire the subject-matter from the seller). For the purposes of the creation of and most other transactions involving leases, the buyer is the tenant, although the landlord can be the buyer on a renunciation or where he pays the tenant for certain variations. An acquisition can take the form of the creation, renunciation, release or variation of an interest in land but not the variation of a lease except where paragraph 29 of schedule 19 to the LBTT(S)A 2013 applies. See LBTT6028. Where:

the tenant gives the landlord consideration in money or money’s worth for the variation of a lease, but the rent and the terms of the lease do not change, the variation is treated as an acquisition of a chargeable interest by the tenant;

the variation of a lease reduces the rent, it is treated as an acquisition of a chargeable interest by the tenant; or

the variation of a lease reduces the term of the lease, it is treated as an acquisition of a chargeable interest by the landlord.

LBTT(S)A 2013 section 6 Nature of acquisition If you are a buyer, you acquire a chargeable interest when an existing interest is transferred, for example a shop is sold and the buyer acquires title to the shop property. A tenant also acquires a chargeable interest that has been created, for example, when a new lease for a shop is granted and the tenant acquires the lease. If the buyer’s interest is altered by renunciation or release from an interest, this is also an acquisition of a chargeable interest. For example, when a tenant surrenders a lease back to the landlord, the landlord acquires the interest. LBTT(S)A 2013 section 7 If there are joint buyers (two or more buyers who are or will be entitled either jointly or in common to the interest in land), any liability in relation to LBTT is a joint and several liability of all the buyers. Any obligation of a buyer in relation to LBTT is an obligation of all the buyers but may be discharged by any of them. Only one LBTT return is required and this can be completed by any one of the buyers. However, each buyer must make a declaration that the LBTT return is complete and correct. LBTT(S)A 2013 section 48 Specific rules also apply for joint buyers involving partnerships and trusts.

http://www.legislation.gov.uk/asp/2013/11/schedule/19/part/6/enacted






LBTT(S)A 2013 schedule 17 paragraph 3 LBTT(S)A 2013 schedule 18 paragraphs 15-18 The seller is the person(s) who disposes of (i.e. sells) the subject matter of the transaction. For the purposes of leases, the seller is the landlord. LBTT(S)A 2013 section 7

http://www.legislation.gov.uk/asp/2013/11/schedule/17/paragraph/3/prospective




LBTT1004 The effective date The date at which the liability to LBTT arises (the tax point) is known as the effective date of the transaction. The effective date is also used to determine when other obligations in relation to the tax must be fulfilled, for example when a LBTT return must be made. In the majority of cases, the effective date of a land transaction is the date that the land transaction is completed (in other words the date of settlement or, in the case of a lease, the date when it is executed by the parties or constituted by any other means). In a standard house purchase, the date of settlement is the date that the purchase price is paid by the buyer in exchange for the seller delivering the keys and disposition. Circumstances where the effective date of a land transaction is not the date that the land transaction is completed include:

substantial performance of a contract without completion - see LBTT1005;

substantial performance of a contract requiring conveyance to a third party - see LBTT1006; and

options and rights of pre-emption – see LBTT1007.

For further guidance on the effective date for land transactions involving leases see LBTT6002.

LBTT(S)A 2013 sections 63 and 64

http://www.legislation.gov.uk/asp/2013/11/part/7/crossheading/interpretation/enacted


LBTT1005 Contract and conveyance

Where a contract for a land transaction is to be completed by a conveyance, the buyer is not regarded as entering into a land transaction because they entered into the contract. The contract must be completed for a land transaction to be made. There are, however, some particular circumstances that must be considered to determine the effective date. LBTT(S)A 2013 section 8 In a standard house purchase the contract is the missives and the conveyance is the disposition. The effective date will be the date of settlement as described above. To determine the effective date in certain non-standard cases, the LBTT legislation includes the concept of ‘substantial performance’ of a contract. A contract is substantially performed if:

the buyer or a person (connected with the buyer) takes possession of the whole (or substantially the whole) of the premises;

a substantial amount of the consideration is paid or provided; or

there is an assignation, sub-sale (but not where sub-sale development relief applies – see LBTT3044) or other transaction whereby a third party is entitled to call for a conveyance to the third party.

In the case of a sub-sale involving a sale by party A to party B and a sale on the same day by party B to party C, the contract between parties A and B is substantially performed (and a liability to tax is triggered) when party B enters into contract with party C. LBTT(S)A 2013 section 14 LBTT(S)A 2013 section 58 Where a contract is completed by a conveyance without having previously

been ‘substantially performed’

Where a contract is completed by a conveyance without having previously been

‘substantially performed’, the contract and conveyance comprise a single land

transaction and the effective date is the date of completion (i.e. in a normal house

purchase, the date of settlement). In a standard house purchase settlement is when

the purchase price is paid by the buyer in exchange for the seller delivering the keys

and disposition.

LBTT(S)A 2013 section 9






Substantial performance of a contract without completion Where a contract is substantially performed but not completed the contract is treated as the transaction and the effective date is the date when the contract was substantially performed. Where a transaction is substantially performed and then is formally completed, then the contract and any subsequent completion are treated as two separate land transactions but tax is chargeable on the second transaction to the extent only that the consideration exceeds that on the first transaction. There may however be a requirement to notify the completion. LBTT(S)A 2013 section 10 Where a contract has been substantially performed and is subsequently rescinded or annulled, or is for any other reason not brought into effect, any tax paid can be repaid to the buyer. If the claim for repayment is made within 12 months of the filing date (see section 83 of the RSTPA 2014) then the claim must be made by amending the LBTT return (see LBTT4006) in respect of the contract. If the claim for repayment is made after this period, the claim must be made under section 107 of the RSTPA 2014 and no later than five years after the date the original LBTT return was required to have been made by (see section 115 of the RSTPA 2014). For further guidance on how to make such a claim see RSTP7003. A separate rule applies for a lease that has been substantially performed without having been executed (see LBTT6024). LBTT(S)A 2013 schedule19 paragraph 25


http://www.legislation.gov.uk/asp/2014/16/section/83






LBTT1006 Contract providing for conveyance to third party Specific rules apply where a contract is entered into whereby one party to the contract (B – the other party being A) has the right to direct a conveyance to themself or to a third party (C). An example of this is a development agreement or a building licence agreement where the developer has the right to enter onto the land and build on it and then direct the conveyance of the completed plots. In this case the effective date of the transaction is the date when the contract is substantially performed by B. If the chargeable interest is conveyed to C at B’s request or direction without B having taken possession or completed, then there is only one land transaction, that between A to C. However, if the contract is substantially performed by B, B is treated as having acquired a chargeable interest and entered into a land transaction. Whether or not a LBTT return is required to be made to us depends on whether or not it is a notifiable transaction (see LBTT4003). The consideration given, or that is to be given, by B is charged to LBTT once substantial performance occurs. Where B directs the original seller (A) to convey a plot to C, the rules above about ‘contract and conveyance’, ‘completion without substantial performance’ and ‘substantial performance without completion’ apply to the contract between B and C and to the conveyance from A to C. The result is that C is liable to pay LBTT on the consideration paid to A or B, either on completion or on substantial performance. A worked example covering a contract which provides for conveyance to a third party is provided separately on our website under ‘LBTT Worked Examples’. LBTT(S)A 2013 section 11




LBTT1007 Options and rights of pre-emption An option is a right to buy something from someone, usually at a pre-agreed price or one linked to a formula. A pre-emption right is commonly known as a right of first refusal. Often granted to family members or the partners or other principals in a business before outsiders, it is the right to buy something before other parties but not usually at an agreed price (in which case it is an option). On a sale with a pre-emption right included in favour of the seller, there are or may be two transactions – the actual sale and the creation of the pre-emption right in the seller’s favour. LBTT arises on the acquisition of an option or on the acquisition of a right of pre-emption in respect of land transactions. The effective date of acquisition of an option or right of pre-emption is when the option or right is acquired. Options fall within LBTT even if the seller can discharge the obligation either by entering into a land transaction or in some other way, such as a payment of money. Any later exercise of an option or right of pre-emption will give rise to a separate land transaction chargeable to LBTT in its own right. Although the exercise of an option or right to pre-emption is a distinct transaction, it may be linked to the earlier grant of the option or right of pre-emption, not necessarily depending on what the intentions of the buyer and seller were at the time of the transaction. If they are linked, then the consideration is aggregated. This may require two LBTT returns if the effect of the aggregation is to make the grant of an option taxable where it was not previously taxable and no initial LBTT return had been made. Options and pre-emption rights may also be linked to each other as well. At the time of the acquisition of the option or right, LBTT is charged on the option price at the applicable rate. If and when the option or right is subsequently exercised, LBTT is charged on the consideration plus the option price at the rate applicable to the total consideration/price. At this time, the buyer is given a credit for any LBTT paid at the time of the acquisition of the option or right. The grant of an option is not the acquisition of a major interest in land. Accordingly the grant of an option is not notifiable unless there is LBTT to pay, or there would be tax to pay but for the availability of a relief. A worked example on options is provided separately on our website under ‘LBTT Worked Examples’. LBTT(S)A 2013 section 12 LBTT(S)A 2013 section 30






LBTT1008 Flowchart of LBTT transaction

Transaction

Is there a land

transaction? i.e. an

acquisition (s.6*) of

a chargeable

interest (s.4*)?

Is the transaction

an exempt

transaction

(s.16*)?

Is the transaction

exempt from

charge by virtue

of relief (s.27*)?

No notification

required.

No charge to tax.

Submit return

(s.29*).

Submit return

(s.29*).

Pay tax (if any)

(s.40*).

Complete land

transaction return

(s.35*) and declaration

(s.36*).

Calculate tax (Part 3*) on

the chargeable

transaction (s.15*) based

on the chargeable

consideration (s.17*).

Complete land

transaction return and

self-assessment (s.35*)

& declaration (s.36*).

NO

YES

YES

NO

YES

NO

Is the transaction

notifiable

(s.30*)?

NO

YES

* References to the LBTT(S)A 2013


LBTT2001 Determining the chargeable consideration The amount of LBTT to be paid in relation to a chargeable transaction is calculated by applying the tax rates and bands to the amount of chargeable consideration for the transaction. This chapter, which mainly covers the provisions of schedule 2 to the LBTT(S)A 2013, helps you establish the chargeable consideration for a land transaction. Separate guidance is available in relation to determining the chargeable consideration for land transactions involving leases – see LBTT6003. This chapter is structured as follows:

What is chargeable consideration – LBTT2002

Debt as consideration - LBTT2003

Carrying out of works - LBTT2004

Contingent, uncertain or unascertained consideration - LBTT2005

Annuities – LBTT2006

Deemed market value where transaction involves connected company - LBTT2007

Linked transactions – LBTT2008

What is not chargeable consideration – LBTT2009

Partition or division of a chargeable interest – LBTT2010

Cases where conditions for exemption are not fully met – LBTT2011

Indemnity given by the buyer – LBTT2012

Buyer bearing inheritance tax liability – LBTT2013

Buyer bearing capital gains tax liability – LBTT2014

Arrangements involving public or educational bodies – LBTT2015

Meaning of market value – LBTT2016

http://www.legislation.gov.uk/asp/2013/11/schedule/2/enacted



LBTT2002 What is chargeable consideration This section of guidance explains what the chargeable consideration is, and special rules which apply to its determination. Separate guidance is available in relation to determining the chargeable consideration for land transactions involving leases – see LBTT6003. For guidance on what items are not included in chargeable consideration see LBTT2009. The chargeable consideration of a land transaction for the purposes of LBTT comprises anything given in money or money’s worth for the subject-matter of the transaction, directly or indirectly by the buyer or a connected party. In a standard house purchase the chargeable consideration notified to us will be the same consideration recorded on the disposition and in the application for registration sent to the Registers of Scotland. The amount of the chargeable consideration includes anything paid for assets that form part of the land or property such as houses, farm buildings, fixtures and fittings (including bathroom and kitchen fittings but not moveable assets such as freestanding furniture, carpets or curtains). For the avoidance of doubt, trees growing in the soil (including any fruit growing on them) constitute part of the land, and therefore part of the chargeable consideration, but the normal annual crops of an arable farm, felled timber and plants or trees growing in free-standing pots do not. LBTT(S)A 2013 schedule 2 paragraph 1

Value added tax and chargeable consideration

The chargeable consideration for a transaction includes any Value Added Tax (VAT) chargeable in respect of the transaction. But where the seller has the option to charge VAT but has not actually made an election to do so by the effective date of the transaction, then any VAT that subsequently becomes payable does not count as chargeable consideration.

LBTT(S)A 2013 schedule 2 paragraph 2 Postponed consideration Where some or all of the consideration is to be paid at a later date, it is the amount agreed that comprises chargeable consideration, and no discount is available for the delay in payment. LBTT(S)A 2013 schedule 2 paragraph 3





Just and reasonable apportionment

In some circumstances the total consideration will have to be apportioned on a just and reasonable basis in order to determine the chargeable consideration for a land transaction. These circumstances include consideration which is attributable:

to two or more land transactions;

in part to a land transaction and in part to another matter; or

in part to matters making it chargeable consideration and in part to other matters.

For the purposes of this rule, any consideration given for what is in substance one bargain is to be treated as attributable to all the elements of the bargain, even though:

separate consideration is, or purports to be, given for different elements of the bargain; or

there are, or purport to be, separate transactions in respect of different elements of the bargain.

LBTT(S)A 2013 schedule 2 paragraph 4 Valuation of non-monetary consideration As a general rule, unless expressly provided otherwise, any non-monetary chargeable consideration or consideration which is debt as defined in LBTT2003 should be valued at its market value at the effective date of the transaction (see LBTT2016). LBTT(S)A 2013 schedule 2 paragraph 7 Conversion of amounts in foreign currency In most transactions money is paid by the buyer, or someone connected to the buyer, in exchange for either ownership of land or for some other interest in relation to land. Where the consideration is in a currency other than sterling, the chargeable consideration is calculated by translating the foreign currency into sterling using the London closing exchange rate on the effective date of the transaction. LBTT(S)A 2013 schedule 2 paragraph 10 Provision of services Where the whole or part of the consideration for a land transaction consists of the provision of services (other than the carrying out of works to which LBTT2004





applies), the value of that consideration is to be taken to be the amount that would have to be paid in the open market to obtain those services. This rule is subject to arrangements involving certain public or education bodies – see LBTT2015. LBTT(S)A 2013 schedule 2 paragraph 12 Land transaction entered into by reason of employment Where the seller in a land transaction is the employer of the buyer (or the employer of a person connected with the buyer), and the land transaction is entered into by reason of that employment, the chargeable consideration cannot be less than the market value (see LBTT2016) of the subject-matter of the transaction on the effective date of the transaction. LBTT(S)A 2013 schedule 2 paragraph 13

Other chargeable consideration rules involving exchanges, debt, the carrying out of works, annuities and linked transactions

In addition to the above rules which determine the chargeable consideration, further guidance on determining the chargeable consideration is also available in relation to:

Exchanges of interests in land – LBTT5002

Debt as consideration - LBTT2003

Carrying out of works - LBTT2004

Contingent, uncertain or unascertained consideration - LBTT2005

Deemed market value where transaction involves connected company - LBTT2007





LBTT2003 Debt as consideration Where the chargeable consideration for a land transaction consists in whole or in part of either:

the satisfaction or release of a debt due to the buyer or owed by the seller; or

the assumption of existing debt by the buyer,

then the chargeable consideration for the transaction is the amount (or, as the case may be, part of the amount) of debt satisfied, released or assumed. The amount that is chargeable consideration cannot exceed the market value (see LBTT2016) of the subject-matter of the transaction.

In addition to the above rule, but only in a case involving the assumption of existing debt by the buyer, where:

the debt assumed is or includes debt secured on the property forming the subject-matter of the transaction; and

immediately before the transaction there were two or more persons each holding an undivided share of that property (or there were two or more such persons immediately after the transaction),

then the amount of secured debt assumed is to be determined as if the amount of that debt owed by each of those persons at a given time were the proportion of it corresponding to the person’s undivided share of the property at that time. This means, for example, that a buyer acquiring only a part share of the property (and accepting joint and several liability for any existing debt) will not be chargeable to the full amount of the debt assumed. Where:

a debt is secured on the subject-matter of a land transaction immediately before and immediately after the transaction; and

the rights or liabilities in relation to that debt of any party to the transaction are changed as a result of or in connection with the transaction,

then for the purposes of this rule there is an assumption of that debt by the buyer, and that assumption of debt constitutes chargeable consideration for the transaction. The amount that is chargeable consideration cannot exceed the market value of the subject-matter of the transaction.

In this page of guidance:

‘debt’ means an obligation, whether certain or contingent, to pay a sum of money either immediately or at a future date;


‘existing debt’, in relation to a transaction, means debt created or arising before the effective date of, and otherwise than in connection with, the transaction; and

references to the amount of a debt are to the principal amount payable or, as the case may be, the total of the principal amounts payable, together with the amount of any interest that has accrued due on or before the effective date of the transaction.

LBTT(S)A 2013 schedule 2 paragraph 8



LBTT2004 Carrying out of works

The chargeable consideration rules below regarding the carrying out of works are subject to the rule involving arrangements with certain public or education bodies – see LBTT2015. Where the whole or part of the consideration for a land transaction consists of the carrying out of works of construction, improvement or repair of a building or other works to enhance the value of land, then:

to the extent that all of the conditions specified below are met, the value of the works does not count as chargeable consideration; and

to the extent that those conditions are not met, the value of the works is to be taken into account as chargeable consideration.

The conditions are:

that the works are carried out after the effective date of the transaction;

that the works are carried out on land acquired or to be acquired under the transaction (‘land acquired or to be acquired’ means the acquisition of a major interest in the land); and

that it is not a condition of the transaction that the works are carried out by the seller or a person connected with the seller.

The value of the works is to be calculated as the amount that would have to be paid in the open market for the carrying out of the works in question. Where a contract has initially been substantially performed without completion and then subsequently completed by conveyance (see LBTT1005), there may be two notifiable transactions - the first being the contract or agreement and the second being the transaction effected on completion or, as the case may be, the grant or execution of the lease. Where this applies, the first condition above is treated as met in relation to the second transaction if it is met in relation to the first. LBTT(S)A 2013 schedule 2 paragraph 11



LBTT2005 Contingent, uncertain or unascertained consideration LBTT is chargeable on the consideration paid for a property. For the position of rent see LBTT6004. Where some or all of the chargeable consideration to be paid is contingent on an uncertain future event, then the amount of consideration used in the LBTT return is determined on the assumption that the contingency will be resolved so that the consideration is payable or, as the case may be, does not cease to be payable. LBTT(S)A 2013 section 18 Where some or all of the chargeable consideration to be paid is uncertain or unascertained because it depends on uncertain future events, then a reasonable estimate of the amount of consideration should be provided in the LBTT return. LBTT(S)A 2013 section 19 Once the contingency is resolved or, as the case may be, the consideration ascertained, if the final consideration differs from that already used in the LBTT return, a further LBTT return should be made and any surplus reclaimed or further tax paid – see LBTT4021. LBTT(S)A 2013 sections 31 and 32 Where contingent, uncertain or unascertained consideration will not be known until after the effective date, it may be possible to make an application to defer payment of LBTT – see LBTT4016. LBTT(S)A 2013 section 20 LBTT(S)A 2013 section 41 A worked example illustrating a transaction involving contingent consideration is provided separately on our website under ‘LBTT Worked Examples’.



http://www.legislation.gov.uk/asp/2013/11/part/4/chapter/1/crossheading/adjustments-and-further-returns/enacted





LBTT2006 Annuities etc.

Where the chargeable consideration for a land transaction is in the form of an annuity, which is:

payable for life;

in perpetuity (that is, forever);

for an indefinite period; or

for a period which exceeds twelve years, the chargeable consideration is a single payment based on 12 years’ annuity payments. Where the payments vary, the 12 highest annual payments (from the effective date of the transaction) are to be used to calculate the chargeable consideration. No account is to be taken of any adjustment of the amount payable in line with the retail prices index, the consumer prices index or any other similar index. LBTT(S)A 2013 section 21 Where necessary, the rules for contingent consideration and uncertain or unascertained consideration (see LBTT2005) will apply to determine the amount of the payment. Where some or all of the chargeable consideration to be paid is contingent on an uncertain future event, then the amount of consideration used in the LBTT return is determined on the assumption that the outcome of the contingency will result in the consideration being paid or, as the case may be, not ceasing to be payable. Where some or all of the chargeable consideration to be paid is uncertain or unascertained because it depends on uncertain future events, then a reasonable estimate of the amount of consideration should be provided in the LBTT return. LBTT(S)A 2013 sections 18 and 19

However, where the chargeable consideration for a land transaction is in the form of an annuity, then payment of LBTT cannot be deferred or an adjustment made of the amount paid at a later date. No adjustment to the amount payable can therefore be made where a contingency ceases or consideration is ascertained.


http://www.legislation.gov.uk/asp/2013/11/part/2/chapter/3/crossheading/contingent-uncertain-or-unascertained-consideration/enacted


LBTT2007 Deemed market value where transaction involves connected company

In most cases LBTT is calculated on the actual consideration paid on a land transaction rather than the deemed market value. However, where the buyer in a land transaction is a company and the seller is connected to the buyer, the chargeable consideration for the transaction will be not less than the market value (see LBTT2016) of the property at the effective date or, if the transaction involves the grant of a lease, then the chargeable consideration is to be taken as not less than the rent. The tax calculation may therefore be based on a value greater than the consideration (if any) actually being paid. The same rule about the chargeable consideration applies where a seller (individual or company) transfers property to a buyer (company) and some or all of the consideration for that transfer consists of the issue or transfer of shares in a company with which the seller is connected. The general rule that transactions with no chargeable consideration are exempt for LBTT (see LBTT3003) does not apply to land transactions falling within this rule. But transactions are still subject to any other applicable provision affording exemption or relief from LBTT. LBTT(S)A 2013 section 22 Section 1122 of the Corporation Tax Act 2010 applies to determine whether the seller is ‘connected’ to the buyer. Shares include stocks and the reference to shares in a company includes a reference to securities issued by a company. LBTT(S)A 2013 section 58 There are three exceptions to the deemed market value rules for connected companies. The rules do not apply where:

immediately after the transaction the company (the buyer) holds the property as a trustee in the course of the business of the management of trusts;

immediately after the transaction the company (the buyer) holds the property as trustee and the seller is only connected with the company by virtue of section 1122 of the Corporation Tax Act 2010; or

(a) the seller is a company; (b) the transaction is, or is part of, a distribution of assets (whether or not on the winding up of the company); and (c) within the last three years, the subject matter of the land transaction, or an interest from which that interest is derived, has not also been the subject of a transaction about which the seller has made a claim for LBTT group relief.


http://www.legislation.gov.uk/ukpga/2010/4/section/1122




If any of these exceptions apply, LBTT will be charged on the actual consideration paid. A worked example on deemed market value where the land transaction involves a connected company is provided separately on our website under ‘LBTT Worked Examples’. LBTT(S)A 2013 section 23





LBTT2008 Linked transactions There are some situations when two or more property transactions that involve the same buyer and seller are treated as being linked for LBTT purposes (see LBTT4013 for further guidance on calculating the tax payable on linked transactions and where a LBTT return, or further return, may need to be made in consequence of a later linked transaction). Amongst other things, this is an anti-avoidance measure to avoid transactions being artificially split up in the hope of reducing or eliminating the LBTT payable. People connected to a buyer or seller can count as being the same buyer or seller.

Section 1122 of the Corporation Tax Act 2010 applies to determine whether parties are ‘connected’. LBTT(S)A 2013 section 58 If, for example, joint buyers structure a purchase in such a way that one of them buys the house and the other buys the gardens, these will be regarded as linked transactions. Tax is then charged on the linked transaction as if they were one transaction. The amount of tax charged will be determined by adding together the chargeable considerations paid for both the house and the gardens. Two transactions involving the same buyer and seller are not necessarily linked. However, transactions are linked if they are part of a single scheme, arrangement or series of transactions (see below). Land transactions involving exchanges of interests in land are not treated as linked transactions (see LBTT5002). The buyer will need to consider all the circumstances surrounding potentially linked transactions before completing the LBTT return. If two transactions are documented separately The form in which the transactions are documented will not determine whether or not they are linked. For example, documenting transactions with separate contracts will not prevent them being linked if the transactions are in fact part of a single deal. Series of transactions A series of transactions means something more than one transaction following another. There must be something else to connect the transactions. In particular, the buyer needs to consider whether the fact that the first transaction had happened has affected the terms of the second transaction. Where successive transactions are linked, for example the grant of an option and its exercise, additional tax may be due for the first transaction. Any additional tax is payable at the same time as tax is payable on the second transaction.




Two or more linked transactions with the same effective date Linked transactions with the same effective date can be reported as a single notifiable transaction using a single LBTT return, if the buyer chooses to do so. Where this is done, the transactions will be treated as a single transaction and all the buyers, if more than one, will be treated as joint buyers. LBTT(S)A 2013 section 57



LBTT2009 Items not included in the chargeable consideration The purchase price may include a payment for items that are not part of the chargeable consideration. Those items must be valued at a rate reflecting their fair market value (see LBTT2016). For example, if carpets are included in the sale of a home, the buyer and seller must agree a fair price which reflects their age and quality (note: fixtures and fittings do however form part of the chargeable consideration – see LBTT2002). This is then subtracted from the price paid to find the chargeable consideration. The same rules apply to other moveable or intangible assets such as plant and machinery, stock in trade or goodwill, if they are included in the sale of a business. The portion of the purchase price allocated to such assets must be a just and reasonable allocation. Other rules apply regarding items that are not included in the chargeable consideration:

Partition or division of a chargeable interest – LBTT2010

Cases where conditions for exemption are not fully met – LBTT2011

Indemnity given by the buyer – LBTT2012

Buyer bearing inheritance tax liability – LBTT2013

Buyer bearing capital gains tax liability – LBTT2014

Arrangements involving public or educational bodies – LBTT2015


LBTT2010 Partition or division of a chargeable interest Where a land transaction involves dividing or partitioning a chargeable interest to which parties are jointly entitled, the share of the interest held by the buyer immediately before the division or partition does not count as the chargeable consideration for the transaction. LBTT(S)A 2013 schedule 2 paragraph 6



LBTT2011 Cases where conditions for exemption are not fully met

Where a land transaction would otherwise be an exempt transaction under paragraph 6 of schedule 1 to the LBTT(S)A 2013 (assents i.e. agreements, and appropriations by personal representative – see LBTT3008) but for the person acquiring the property giving consideration for it, the chargeable consideration for the transaction does not include the amount of any secured debt assumed (debt that, immediately after the death of the deceased person, is secured on the property). Where a land transaction would otherwise be an exempt transaction under paragraph 7 of schedule 1 to the LBTT(S)A 2013 (variation of testamentary dispositions etc. – see LBTT3008) but for a failure to meet the condition that no consideration can be given for the transaction (other than the variation of another disposition), the chargeable consideration for the transaction does not include the making of any variation of another disposition. LBTT(S)A 2013 schedule 2 paragraph 9





LBTT2012 Indemnity given by buyer

Where the buyer agrees to indemnify the seller in respect of liability to a third party arising from breach of an obligation owed by the seller in relation to the land that is the subject of the transaction, neither the agreement nor any payment made in pursuance of it counts as chargeable consideration.




LBTT2013 Buyer bearing inheritance tax liability

Where there is a land transaction that is either:

a transfer of value within section 3 of the Inheritance Tax Act 1984; or

a disposition, effected by will or under the law of intestacy, of a chargeable interest comprised in the estate of a person immediately on the person’s death; and

the buyer is or becomes liable to pay, agrees to pay or does in fact pay any inheritance tax due in respect of the transfer or disposition,

then the buyer’s liability, agreement or payment does not count as chargeable consideration for the transaction. LBTT(S)A 2013 schedule 2 paragraph 15




LBTT2014 Buyer bearing capital gains tax liability

Where there is a land transaction under which the chargeable interest in question is either:

acquired otherwise than by a bargain made at arm’s length; or

is treated by section 18 of the Taxation of Chargeable Gains Act 1992 (connected persons) as so acquired,

and the buyer is or becomes liable to pay (or does in fact pay) any Capital Gains Tax due in respect of the corresponding disposal of the chargeable interest, then the buyer’s liability or payment does not count as chargeable consideration for the transaction. This exclusion does not, however, apply if there is any other chargeable consideration. LBTT(S)A 2013 schedule 2 paragraph 16

http://www.legislation.gov.uk/ukpga/1992/12/section/18/enacted



LBTT2015 Arrangements involving public or educational bodies

Certain arrangements (see further below) involving some types of public or educational bodies (‘qualifying bodies’) do not count as chargeable consideration.

Qualifying bodies are:

public bodies within paragraph 4 of schedule 16 of the LBTT(S)A 2013;

grant-aided schools within the meaning of section 135(1) of the Education (Scotland) Act 1980; and

any post-16 education body within the meaning of section 35(1) of the Further and Higher Education (Scotland) Act 2005.

The arrangements are where:

there is a transfer of the ownership, or the grant or assignment of a lease, of land by a qualifying body (A) to a non-qualifying body (B) (‘the main transfer’);

in whole or in part consideration of the main transfer there is a grant by B to A of a lease or sub-lease of the whole, or substantially the whole, of that land (‘the leaseback’);

B undertakes to carry out works or provide services to A; and

some or all of the consideration given by A to B for the carrying out of those works or the provision of those services is consideration in money,

whether or not there is also a transfer, or the grant or assignment of a lease, of any other land by A to B (a ‘transfer of surplus land’). There is no need for the main transfer and the transfer, lease or assignment of any surplus land to be separate transactions. For example, there may be a lease by A to B which acts both as the main transfer in respect of part of the subject matter and as the transfer of surplus land in respect of the rest. Where the above arrangements are entered into, the following do not count as chargeable consideration for the main transfer or any transfer of surplus land:

the leaseback;

the carrying out of building works by B for A; or

the provision of services by B to A.

This means that LBTT will generally be charged only on any cash premium or rent paid by B.

http://www.legislation.gov.uk/asp/2013/11/schedule/16/paragraph/4






The chargeable consideration for the leaseback does not include:

the main transfer;

any transfer of surplus land; or

the consideration in money paid by A to B for the building works or other services referred to further above.

This means that there will generally be no chargeable consideration for the leaseback. The above chargeable consideration rules applying to the main transfer, transfer of surplus land or the leaseback do not apply for the purposes of determining whether or not the land transaction is notifiable. LBTT(S)A 2013 schedule 2 paragraph 17 The Land and Buildings Transaction Tax (Qualifying Public or Educational Bodies) (Scotland) Amendment Order 2014





LBTT2016 Meaning of market value The market value of land or buildings is the price that might reasonably be expected to be fetched in a sale between a willing buyer and willing seller in the open market. The definition is derived from the definitions set out in sections 272 to 274 of the Taxation of Chargeable Gains Act 1992. LBTT(S)A 2013 section 62 Where the consideration for a land transaction is satisfied by the provision of services or other non-monetary consideration, the market value of those services will be the amount they might reasonably be expected to have cost if purchased at arm’s length on the open market. LBTT(S)A 2013 schedule 2 paragraph 12 The market value of land and buildings does not include Value Added Tax (VAT) even if VAT is chargeable on the transfer of the asset. This is because market value is based on a hypothetical transaction, not on the actual transaction. If a transaction requires a valuation it is the buyer’s responsibility to provide it - we are not responsible for obtaining or preparing valuations on behalf of a buyer. An acceptable valuation of land and buildings may require the input of someone with professional qualifications. We may employ professional valuers to check valuations or apportionments.

http://www.legislation.gov.uk/ukpga/1992/12/part/VIII/enacted

http://www.legislation.gov.uk/ukpga/1992/12/part/VIII/enacted




LBTT3001 Determining whether tax is payable: Exemptions and reliefs

The LBTT(S)A 2013 distinguishes chargeable transactions and notifiable transactions. With certain exceptions, all chargeable transactions are notifiable, but not all notifiable transactions are chargeable. Accordingly, sometimes a LBTT return must be made to us where no tax is payable. See LBTT4003 for further guidance on which land transactions (not involving leases) are notifiable and LBTT6010 for land transactions involving leases which are notifiable. LBTT must be paid on all land transactions in Scotland (see section 15 of the LBTT(S)A 2013) unless:

the interest in question is an exempt interest, namely a security interest such as the creditor’s interest in a standard security;

the land transaction is specifically classed as an exempt transaction (see LBTT3002 for guidance on exempt transactions) by the LBTT(S)A 2013; LBTT(S)A 2013 section 16 LBTT(S)A 2013 schedule 1

or

the land transaction is exempt from charge, either because the chargeable consideration falls within the nil rate band or the tax charge has been reduced, deferred or eliminated due to a relief (not all of which can eliminate the charge entirely). See LBTT3010 for guidance on reliefs. LBTT(S)A 2013 section 27







LBTT3002 Exempt Transactions The acquisition of an exempt interest, namely a security interest such as the creditor’s interest in a standard security, falls outside the charge to LBTT. LBTT(S)A 2013 section 5 Furthermore, there are seven types of land transactions which are specifically exempt from LBTT. No tax is charged on these transactions and no LBTT return is required to be made to us. LBTT(S)A 2013 schedule 1 They are:

no chargeable consideration – see LBTT3003;

acquisitions by the Crown – see LBTT3004;

residential leases and licences – see LBTT3005;

transactions in connection with a divorce – see LBTT3006;

transactions in connection with the dissolution of a civil partnership - see LBTT3007;

assent and appropriations by personal representatives – see LBTT3008; and

variation of testamentary dispositions etc. - see LBTT3009. Any fraudulent arrangements concerning exemptions will be treated as tax evasion and referred for criminal investigation and prosecution. Any artificial arrangements concerning exemptions are likely to fall foul of the Scottish General Anti-Avoidance Rule (see RSTP8001).





LBTT3003 No chargeable consideration Land or buildings may be gifted or the ownership transferred to another person for no 'chargeable consideration'. This means that no money (or money’s worth) changes hands, and there is no other consideration which has a monetary value. But where a land transaction involves the buyer both being gifted property and assuming existing debt (such as assuming the liability of a mortgage), then the debt assumed is chargeable consideration for LBTT purposes (see LBTT2003). This exemption does not apply where the buyer is a company and either the seller (whether an individual or company) is connected with the buyer or some or all of the consideration consists of the issue or transfer of shares in a company with which the seller is connected – see LBTT2007. LBTT(S)A 2013 schedule 1 paragraph 1



LBTT3004 Acquisitions by the Crown The acquisition of a chargeable interest by one of the following is an exempt transaction:

the Scottish Ministers;

the Scottish Parliamentary Corporate Body;

a Minister of the Crown;

the Corporate Officer of the House of Lords/Commons;

a Northern Ireland department;

the Northern Ireland Assembly Commission;

the Welsh Ministers, the FM for Wales and the Counsel General to the Welsh Assembly Government;

the National Assembly for the Wales Commission; and

the National Assembly for Wales.




LBTT3005 Residential leases and licences With one exception (see below), a lease of residential property over 20 years in duration may not be granted in Scotland. In other words, ‘leasehold’ title which is common in England and Wales is extremely rare in Scotland. This exemption therefore covers short duration residential leases in Scotland. A transaction relating to a lease of a residential property is only exempt where the main subject matter consists entirely of an interest in land that is residential property or, where the transaction is one of a number of linked transactions, the main subject matter of each transaction consists entirely of an interest in land that is residential property. Any artificial arrangements constructed to allow commercial arrangements to benefit from the residential exemption may fall foul of the Scottish General Anti-Avoidance Rule (see RSTP8001). The one exception is certain long leases which are qualifying leases for the purposes of section 1 of the Long Leases (Scotland) Act 2012. These leases are not exempt from LBTT. Broadly, qualifying leases are long residential leases which are analogous to ‘leasehold’ title in England and Wales. The ‘owner’ of residential property on a leasehold-like basis in Scotland will probably be unaware that their title is different to a conventional Scottish title. The Long Leases (Scotland) Act 2012 will automatically convert most qualifying leases into the normal right of ownership on 28 November 2015. Where a residential lease is not a qualifying lease it is not sufficiently analogous to leasehold title to fall within the charge to LBTT. Accordingly, the types of qualifying leases which will be chargeable to LBTT (and which do not benefit from the exemption) are:

leasehold-like titles assigned between 1 April 2015 and 28 November 2015 – the assignation (acting in the place of a conventional disposition) cannot be registered in the Land Register unless any necessary LBTT return and arrangements for payment of tax are made. These titles will remain within the scope of LBTT following 28 November 2015 as ordinary Scottish titles to land; and

any such titles assigned after 28 November 2015.

Licences of any type (residential or non-residential) are exempt - see LBTT6001.



http://www.legislation.gov.uk/asp/2012/9/part/1/crossheading/determination-of-qualifying-lease



LBTT3006 Transactions in connection with a divorce This exemption applies when a couple gets divorced, there is a nullity of marriage or a judicial separation and their property including any land is split between them. The exemption applies to transactions under court orders and agreements between the parties. LBTT(S)A 2013 schedule 1 paragraph 4



LBTT3007 Transactions in connection with the dissolution of a civil partnership This exemption applies when a couple ends their civil partnership and the parties agree to split their property (including any land) between them, or the property is split under the terms of a court order or by agreement between the parties. LBTT(S)A 2013 schedule 1 paragraph 5



LBTT3008 Assent and appropriations by personal representatives This exemption applies when property is left to another person in a will or on intestacy (i.e. the deceased person did not make a will). The exemption includes property that has outstanding debt on it, for example a mortgage. However, the transaction is not an exempt transaction if consideration is given for the property (other than the assumption of secured debt i.e. debt which immediately after the death of the person was secured on the property). LBTT(S)A 2013 schedule 1 paragraph 6 See also the rules in relation to chargeable consideration (LBTT2011). LBTT(S)A 2013 schedule 2 paragraph 9




LBTT3009 Variation of testamentary dispositions etc. This exemption applies to transactions which change the terms of a will or intestacy (within two years of someone dying) so that a different beneficiary receives a property. Provided the new beneficiary does not make any compensation payment, including the assumption of liability for a mortgage, the transaction is exempt from LBTT. A variation in the terms of the will or intestacy in favour of the original beneficiary does not count as a compensation payment - for example, leaving them something else instead of the property. LBTT(S)A 2013 schedule 1 paragraph 7 See also the rules in relation to chargeable consideration (LBTT2011). LBTT(S)A 2013 schedule 2 paragraph 9




LBTT3010 Tax Reliefs There are a number of tax reliefs which provide whole or partial relief from LBTT. Any relief must be claimed in the first LBTT return made in relation to the transaction or in an amendment of that return, even if no tax is due. The quickest and easiest way to make the LBTT return is by completing and submitting it online. Before making a claim for relief, buyers must satisfy themselves that the relief is due and that all the relevant conditions have been met. In order to claim a relief, the buyer should indicate that a relief is being claimed and complete the relevant section of the LBTT return, indicating which relief, or reliefs, is or are being claimed. Any fraudulent arrangements concerning reliefs will be referred for criminal investigation and prosecution. Any artificial arrangements concerning reliefs are likely to fall foul of the Scottish General Anti-Avoidance Rule (see RSTP8001) even where the schedule for an individual relief does not contain a specific Targeted Anti-Avoidance Rule (TAAR). Guidance on each relief, including the conditions and rules pertaining to each relief, is available as follows:

Sale and leaseback relief – LBTT3011

Relief where house building company buys home from a person who is buying a new home – LBTT3012

Relief where property trader buys home from a person who is buying a new home – LBTT3013

Relief where property trader buys home to avoid a chain of transactions breaking down – LBTT3014

Multiple dwellings relief – LBTT3015

Relief for certain acquisitions made by registered social landlords – LBTT3016

Alternative property finance relief – LBTT3017

Alternative property finance relief involving a lease or sub-lease - LBTT3018

Alternative property finance relief involving owners in common - LBTT3019

Alternative property finance relief: land sold to financial institution and re-sold to a person - LBTT3020

Relief for alternative finance investment bonds – LBTT3021



Rules relating to relief for alternative finance investment bonds where one bond asset is substituted for another - LBTT3022

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

Crofting community right to buy relief – LBTT3024

Group relief – LBTT3025

Withdrawal of group relief – LBTT3026

Circumstances where group relief is not withdrawn – LBTT3027

Recovery of group relief where relief has been withdrawn or partially withdrawn - LBTT3028

Reconstruction and acquisition relief – LBTT3029

Reconstruction relief – LBTT3030

Acquisition relief – LBTT3031

Withdrawal of reconstruction and acquisition relief – LBTT3032

Recovery of reconstruction or acquisition relief where relief has been withdrawn or partially withdrawn – LBTT3033

Relief for incorporation of limited liability partnership – LBTT3034

Charities relief – LBTT3035

Friendly societies relief – LBTT3036

Building societies relief – LBTT3037

Relief for certain compulsory purchases – LBTT3038

Relief for compliance with planning obligations – LBTT3039

Public bodies relief – LBTT3040

Visiting forces and international military headquarters reliefs – LBTT3041

Relief for property accepted in satisfaction of tax – LBTT3042


Lighthouses relief – LBTT3043

Sub-sales development relief - LBTT3044


LBTT3011 Sale and leaseback relief This relief is provided by the provisions of schedule 3 to the LBTT(S)A 2013. Description of relief – Sale and leaseback transactions involve a buyer agreeing to purchase land or buildings from a seller, then that same buyer leasing the land or buildings, or part of them, back to the seller who then becomes the tenant. Subject to certain conditions, sale and leaseback relief ensures that the second transaction, the leaseback, is relieved from LBTT. LBTT(S)A 2013 schedule 3 paragraph 2 Relief conditions – all three of the conditions must be met for sale and leaseback relief to apply:

the sale must be entered into wholly or partly in consideration of the leaseback;

any other consideration for sale is the payment of money (in any currency) or the assumption, satisfaction or release of debt; and

where both parties are bodies corporate at the effective date of the leaseback, they are not members of the same group for the purposes of group relief.


Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website.

http://www.legislation.gov.uk/asp/2013/11/schedule/3/prospective






LBTT3012 Relief where house building company buys a home from a person who is buying a new home This relief is provided by the relevant provisions of schedule 4 to the LBTT(S)A 2013. Description of relief – Where a house building company buys a home from a person who is buying a new home from the house building company (i.e. a ‘part-exchange deal’), the purchase by the house building company is relieved from LBTT if certain conditions are met. LBTT(S)A 2013 schedule 4 paragraph 2 This relief does not apply to persons who exchange homes. Relief conditions - The person(s) must:

buy a new home from the house building company;

have lived in the old home as their main or only residence at some time during the two years before the house building company bought it from them;

intend to live in the new home as their main or only residence; and

sell the existing home to the house building company in total or partial consideration for the new home.

LBTT(S)A 2013 schedule 4 paragraph 4 In addition, the garden or grounds sold with the home to the house building company must not exceed the ‘permitted area’ which is 0.5 hectares (including the site of the home) or, if larger, it must be a piece of ground in keeping with the size and character of the home. In the latter case, the permitted area is to be taken as the part of the land that would be most suitable for occupation and enjoyment of the home as its garden or grounds if the rest of the land were separately occupied. Partial relief - If the conditions listed above are met, but the condition relating to the permitted area of the garden or grounds is not, partial relief may be claimed. The chargeable consideration for the acquisition of the person’s home by the house building company is calculated by deducting the market value of the permitted area from the market value of the home. LBTT(S)A 2013 schedule 4 paragraph 3 Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website.








LBTT3013 Relief where property trader buys home from a person who is buying a new home This relief is provided by the relevant provisions of schedule 4 to the LBTT(S)A 2013. Description of relief – Where a property trader (as defined under paragraph 25 of schedule 4 to the LBTT(S)A 2013) buys a home from a person who is buying a new home from a house building company, the purchase by the property trader is relieved from LBTT if certain conditions are met. LBTT(S)A 2013 schedule 4 paragraph 5 This relief does not apply to persons who exchange homes. Relief conditions – All six of the qualifying conditions must be met for the relief to be claimed:

1. The acquisition of the home must be made in the course of a business that includes or consists of acquiring dwellings from persons who acquire new homes from house building companies.

The person(s) must: 2. have lived in the home as their main or only residence at some time during

the two years before the property trader bought it;

3. buy a new home from a house building company; and

4. intend to live in the new home as their main or only residence.

5. The property trader does not intend:

to spend (meaning any financial outlays in this context) more than the permitted amount on refurbishment of the home. (Refurbishment means the carrying out of works to enhance the value of the home but does not include cleaning the home or works in order to meet minimum safety standards). The permitted amount depends on the consideration for the home as follows:

Consideration for the acquisition of the home

Permitted amount

Not more than £200,000 £10,000

More than £200,000 but less than £400,000

5% of the consideration

More than £400,000 £20,000

LBTT(S)A 2013 schedule 4 paragraphs 27 and 28

to grant a lease or licence of the home, except for the grant of a lease or licence for no more than six months; or


http://www.legislation.gov.uk/asp/2013/11/schedule/4/part/6/crossheading/meaning-of-property-trader-and-principal/prospective



http://www.legislation.gov.uk/asp/2013/11/schedule/4/part/6/crossheading/meaning-of-refurbishment-and-the-permitted-amount/prospective


to permit any principal (as defined under paragraph 25 of schedule 4 to LBTT(S)A 2013) or employee, or anyone connected to them, to occupy the home.

6. The area of land acquired by the property trader must not exceed the

‘permitted area’ which is 0.5 hectares (including the site of the home) or, if larger, it must be a piece of ground in keeping with the size and character of the home. In the latter case, the permitted area is to be taken as the part of the land that would be most suitable for occupation and enjoyment of the home as its garden or grounds if the rest of the land were separately occupied.

LBTT(S)A 2013 schedule 4 paragraphs 7, 20 and 21 Partial relief - If the conditions listed above are met, but the condition relating to the permitted area of the garden or grounds is not, partial relief may be claimed. The chargeable consideration for the acquisition of the person’s home by the property trader is calculated by deducting the market value of the permitted area from the market value of the home. LBTT(S)A 2013 schedule 4 paragraph 6 Withdrawal of the relief - Relief is withdrawn if the property trader:

spends more than the permitted amount on refurbishment of the home;

grants a lease or licence of the home, except for the grant of a lease or licence for no more than six months; or

permits any principal or employee, or anyone connected to them, to occupy the home.


Where one of these events occurs, the property trader must make a further LBTT return to us. The LBTT return must identify how much tax is chargeable. Where relief is withdrawn, the amount of tax chargeable is the amount that would have been chargeable for the transaction but for the relief. LBTT(S)A 2013 schedule 4 paragraph 13 The LBTT return must be made before the end of 30 days beginning with the day after the day that the event occurred. Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website.





http://www.legislation.gov.uk/asp/2013/11/schedule/4/part/5/crossheading/relief-under-part-3/prospective





LBTT3014 Relief where property trader buys home to avoid a chain of transactions breaking down This relief is provided by the relevant provisions of schedule 4 to the LBTT(S)A 2013. Description of relief – Where a property trader buys a home from a person, the purchase by the property trader is relieved from LBTT if certain conditions are met. LBTT(S)A 2013 schedule 4 paragraph 9 Relief conditions – The eight qualifying conditions are as follows:

1. The person has made arrangements to sell the old home and buy another one;

2. The arrangements to sell the old home fall through;

3. The acquisition by the property trader of the old home is made to allow the acquisition of the other home by the person to proceed;

4. The acquisition of the home must be made in the course of a business that includes or consists of acquiring dwellings from individuals in the situation described in the first three conditions above;

5. The person must have lived in the home as their main or only residence at some time during the two years before the property trader bought it;

6. The person intends to use the other home as their main or only residence;

7. The property trader does not intend:

to spend (meaning any financial outlays in this context) more than the permitted amount on refurbishment of the home. Refurbishment means the carrying out of works to enhance the value of the home but does not include cleaning the home or works in order to meet minimum safety standards. The permitted amount depends on the consideration of the home as follows:

Consideration for the acquisition of the home

Permitted amount

Not more than £200,000 £10,000

More than £200,000 but less than £400,000

5% of the consideration

More than £400,000 £20,000


to grant a lease or licence of the home, except for the grant of a lease or licence for no more than six months; or



http://www.legislation.gov.uk/asp/2013/11/schedule/4/part/6/crossheading/meaning-of-refurbishment-and-the-permitted-amount/prospective


to permit any principal or employee, or anyone connected to them, to occupy the home; and

8. the area of land acquired by the property trader must not exceed the permitted area which is 0.5 hectares (including the site of the home) or if larger, it must be a piece of ground in keeping with the size and character of the home. In the latter case, the permitted area is to be taken as the part of the land that would be most suitable for occupation and enjoyment of the home as its garden or grounds if the rest of the land were separately occupied.

LBTT(S)A 2013 schedule 4 paragraphs 11, 20 and 21 Partial relief - If the conditions 1-7 listed above are met, but the condition relating to the permitted area of the garden or grounds is not, partial relief may be claimed. The chargeable consideration for the acquisition of the person’s home by the property trader is calculated by deducting the market value of the permitted area from the market value of the home. LBTT(S)A 2013 schedule 4 paragraph 10 Withdrawal of the relief - Relief is withdrawn if the property trader:

spends more than the permitted amount on refurbishment of the home;

grants a lease or licence of the home, except for the grant of a lease or licence for no more than six months; or

permits any principal or employee, or anyone connected to them, to occupy the home.

LBTT(S)A 2013 schedule 4 paragraphs 16 and 17 Where one of these events occurs, the property trader must make a further LBTT return to us. The return must identify how much tax is chargeable. Where relief is withdrawn, the amount of tax chargeable is the amount that would have been chargeable for the transaction but for the relief. LBTT(S)A 2013 schedule 4 paragraph 13 The LBTT return must be made before the end of 30 days beginning with the day after the day that the event occurred. Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website.



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LBTT3015 Multiple dwellings relief This relief is provided by the provisions of schedule 5 to the LBTT(S)A 2013. A worked example on multiple dwellings relief is provided separately on our website under ‘LBTT Worked Examples’. Description of relief – This is a form of partial relief from LBTT which ensures that where a taxpayer is buying multiple dwellings in a single transaction, the taxpayer is not taxed at a higher tax band when the transaction involves dwellings which, if bought separately, would fall into a lower tax band. This partial relief ensures that in all cases, a prescribed minimum amount of tax is paid on land transactions involving the acquisition of multiple dwellings. The definition of a ‘residential property’ is set out in LBTT(S)A 2013 section 59. The relief applies where the transaction includes 2 or more dwellings or 2 or more dwellings and other property. The relief also applies to linked transactions where a transaction involves a single dwelling and it is linked to one of a number of transactions and the main subject matter of at least one of the other transactions involves some other dwelling or dwellings or some other dwelling or dwellings and other property. The relief does not apply to leased dwellings. LBTT(S)A 2013 schedule 5 part 2 The relief does not apply where crofting community right to buy relief is available, or where group relief, reconstruction relief, acquisition relief, or charities relief is available or has been withdrawn. LBTT(S)A 2013 schedule 5 paragraph 6 Relief mechanism - the amount of tax due The amount of tax due on a transaction involving multiple dwellings is calculated by multiplying the tax due in relation to a dwelling (DT) by the number of dwellings (ND), then adding the tax due on any other property (RT). i.e. The amount of tax due = (DT x ND) + RT LBTT(S) A 2013 schedule 5 paragraph 10 Tax due in relation to dwellings (DT) To calculate the tax due in relation to a dwelling (DT), firstly calculate the total consideration attributable to dwellings (or if it is a linked transaction, add the consideration attributable to dwellings to the consideration attributable to dwellings for all other relevant transactions).








Then divide the total consideration attributable to dwellings by the total number of dwellings. This gives you the average consideration for all the dwellings. Then calculate the tax due for that average consideration using the tax rates and bands for residential property (see LBTT4009), assuming the transaction is not a linked transaction. Tax rates and bands for residential property are used for calculating the tax due subject to the relief regardless of how many dwellings are being acquired. This sum is then multiplied by the number of dwellings (ND) that are, or form part of, the transaction. This gives the total amount of tax payable for the dwelling element of the transaction. Tax due in relation to property other than dwellings (RT) Adding the total amount of tax payable for the dwelling element to the amount of tax due in relation remaining property gives the total amount of tax payable. To calculate the tax due on property other than dwellings (RT), calculate the amount of tax that would be due on the transaction in the absence of this relief (figure 1). Divide the consideration attributable to remaining property by the chargeable consideration for the transaction as a whole (that fraction being figure 2), then multiply figure 1 by figure 2. The result is the amount of tax due in relation to remaining property. Applying the minimum prescribed amount of tax to the part of the transaction relating to dwellings The total amount of tax payable in relation to dwellings cannot be assessed at less than a minimum prescribed amount of 25% of the total amount of tax chargeable in relation to the dwellings in the absence of the relief. So if the result of the tax calculation in relation to the dwellings (DT x ND) shows that the total amount of tax payable is less than 25% of the total amount of tax chargeable for the dwellings in the absence of the relief, then the amount of tax payable in relation to the dwellings must be assessed at 25% of the total amount of tax chargeable on the dwellings for the transaction in the absence of the relief. Any tax on remaining property is then added to find the total amount of tax due on the whole transaction. i.e. where DT x ND is less than the minimum prescribed amount, the amount of tax chargeable in relation to the relevant transaction is:

MPA + RT where:

MPA is the minimum prescribed amount; and


RT is the tax due in relation to remaining property. The minimum prescribed amount (MPA) is 25% of:

TT − RT where:

TT is the amount of tax that would be due in respect of the transaction but for this schedule; and

RT is the tax due in relation to remaining property. LBTT(S)A 2013 schedule 5 part 4 The minimum prescribed amount of 25% is provided for in The Land and Buildings Transaction Tax (Prescribed Proportions) (Scotland) Order 2014. If only dwellings are being acquired (i.e. with no remaining property involved), to calculate the total amount of tax chargeable for the whole transaction in the absence of the relief, use the residential tax rates and bands (see LBTT4009) if there is more than one dwelling and fewer than six involved in the transaction. If six or more dwellings form a single transaction, those dwellings are treated as not being residential property. Thus the non-residential tax rates and bands apply (see LBTT4011). LBTT(S)A 2013 section 59(8) Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website. Withdrawal of the relief - the relief is withdrawn in full if a change of circumstance or change of plan takes place within the ‘relevant period' and if that event had occurred immediately before the effective date, relief would not have been available. LBTT(S)A 2013 schedule 5 paragraph 16 The relief is partially withdrawn if a change of circumstance or change of plan takes place within the ‘relevant period' and if that event had occurred immediately before the effective date, relief would have been available but more tax would have been payable. Tax is chargeable as if the event had occurred immediately before the effective date and is calculated by reference to the tax rates and bands in force at the effective date of the transaction. LBTT(S)A 2013 schedule 5 paragraphs 18, 19 and 20 The 'relevant period' is the shorter of:









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the period ending three years after the effective date of the transaction; or

the period beginning with the effective date of the transaction and ending with the date on which the buyer disposes of that dwelling to someone who is not connected with the buyer.

In the case of a transaction substantially performed before completion, the ‘relevant period’ runs from the date of substantial performance. LBTT(S)A 2013 schedule 5 paragraphs 21 and 22 The recalculation of the tax due is based on the whole of the consideration given for the subject-matter of the transaction and the number of dwellings following the event, including any dwellings sold on prior to the event. Where relief is withdrawn either partially or in full, the taxpayer must make a further LBTT return to us (see LBTT4022).

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LBTT3016 Relief for certain acquisitions by registered social landlords This relief is provided by the provisions of schedule 6 to the LBTT(S)A 2013. Description of relief - Relief from LBTT is available for a land transaction that is partially or fully funded by public subsidy, where the buyer is a registered social landlord and where any or all of three qualifying conditions are met. Relief conditions – The three qualifying conditions for the relief are as follows: 1. The registered social landlord (RSL) must be controlled by its tenants (i.e. the

majority of the board members are tenants occupying properties owned or managed by the registered social landlord). A ‘board member’ is:

if the RSL is a company, a director of the company;

if the RSL is a body corporate whose affairs are managed by its members, one of those members;

if the RSL is a body of trustees, one of those trustees; or

otherwise, a member of the management committee or other body which is entrusted with the management of the registered social landlord;

or

2. The seller must be one of the following:

a registered social landlord;

the Scottish Ministers; or

a local authority; or

3. The transaction must be funded with the assistance of a grant or other financial assistance:

made or given by way of a distribution under section 25 of the National Lottery etc. Act 1993 (application of money by distributing bodies); or

under section 2 of the Housing (Scotland) Act 1988 (general functions of the Scottish Ministers).









LBTT3017 Alternative property finance relief This relief is provided by the provisions of schedule 7 to the LBTT(S)A 2013. Where alternative property finance arrangements are used to finance an acquisition, to avoid taxing the transaction more than once, relief from LBTT is available where one of three different sets of alternative property finance arrangements is in place:

where a financial institution buys a property (the first transaction), then leases or sub-leases it to a person (the second transaction) and agrees that at the end of that term it will transfer the property to that person (the third transaction) - see LBTT3018;

where a financial institution and person purchase a property as owners in common - see LBTT3019; or

where a financial institution purchases a property and re-sells it to a person, the person borrows some or all of the purchase price from the financial institution and grants a mortgage to the financial institution over that property - see LBTT3020.

LBTT(S)A 2013 schedule 7 part 2 For the purposes of this relief:

‘Financial institution’ has the meaning given by section 564B of the Income Tax Act 2007, omitting section 564B(1)(d);

‘Arrangements’ include any agreements, understanding, scheme, transaction or series of transactions whether these are legally enforceable or not; and

references to a person are to be read (in relation to times after the death of the person concerned) as references to the person’s personal representatives.

LBTT(S)A 2013 schedule 7 part 5





LBTT3018 Alternative property finance relief involving a lease or sub-lease This relief is provided by the relevant provisions of schedule 7 to the LBTT(S)A 2013. Description of relief – This form of the relief applies where a financial institution buys a property (the first transaction), leases or sub-leases it to a person (the second transaction) and agrees that at the end of that term it will transfer the property to that person (the third transaction). As a series of land transactions take place under these arrangements the effect of the relief is to bring the amount of LBTT payable on the purchase of a property using these arrangements in line with the amount of tax that would be due where a purchase is made using a conventional mortgage product. The parity is achieved by relieving the second (lease) and third (eventual transfer to the person) transactions from LBTT and disapplying the substantial performance tests. These rules ensure that, where the arrangements are completed in the manner provided for, and all the other rules are complied with, only one LBTT charge is payable (although as explained below, in certain circumstances relief for the first transaction may also be claimed). This form of alternative property finance relief is not available:

where either group relief (see LBTT3025), reconstruction relief (see LBTT3030) or acquisition relief (see LBTT3031) is available for the first transaction or has been withdrawn from the first transaction; or

where the alternative finance arrangements involve arrangements or connected arrangements for someone to acquire control of the financial institution even if the arrangements include certain conditions.

‘Connected arrangements’ means any arrangements entered into in connection with the making of the alternative finance arrangements (including arrangements involving one or more persons who are parties to the alternative finance arrangements). Section 1124 of the Corporation Tax Act 2010 applies for determining who has control of the financial institution. LBTT(S)A 2013 schedule 7 part 3 The relief mechanism – The first transaction (the purchase of a major interest in land by the financial institution) will generally be chargeable to LBTT but relief may be claimed by the financial institution if the seller is:

the person who enters into the arrangements - the first case; or





another financial institution by which the interest was acquired under arrangements described above entered into between it and the person - the second case.

Relief from LBTT may be claimed by the person on the second transaction (the granting of a lease by the financial institution to the person) if all the requirements relating to the first transaction are complied with, including payment of any LBTT due on the first transaction. There are no other requirements to obtaining the relief on the second transaction. Relief from LBTT may be claimed by the person on the third transaction if all the requirements relating to both the first and second transactions are complied with and at all times between the second and third transactions:

the chargeable interest purchased under the first transaction is held by a financial institution; and

the lease, or sublease, granted under the second transaction is held by the person.

The third transaction is not to be treated:

as substantially performed unless and until the third transaction is entered into (thus disapplying the rules about substantial performance); or

as the grant of an option under the rules about options and rights of pre-emption in section 12 of the LBTT(S)A 2013 (see LBTT1007).

Exempt interests An interest held by a financial institution as a result of the ‘first transaction’ (the acquisition of a major interest in land by the financial institution) is an exempt interest. Any transfer of that interest therefore incurs no tax and is not notifiable to us. The interest ceases to be an exempt interest if:

the lease or sub-lease (the second transaction) ceases to have effect; or

the third transaction (the right of a person to require the institution to transfer the major interest purchased by the institution under the first transaction) ceases to have effect.

The interest held by a financial institution as a result of the ‘first transaction’ is not an exempt interest if the first transaction is subject to a claim for either group relief (see LBTT3025), reconstruction relief (see LBTT3030) or acquisition relief (see LBTT3031).



The rules about exempt interests do not make either the first transaction itself or the third transaction an exempt interest. Relief will be available for these transactions, but the transactions remain notifiable to us. LBTT(S)A 2013 schedule 7 part 4 Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website.





LBTT3019 Alternative property finance relief involving owners in common This relief is provided by the relevant provisions of schedule 7 to the LBTT(S)A 2013. Description of relief – This form of the relief applies where a financial institution and person purchase a property as owners in common whereby the person is granted a right to exclusive occupation by the financial institution and has the right for the interest held by the financial institution to be transferred to them in one or a series of transactions. LBTT(S)A 2013 schedule 7 paragraph 7 As a series of land transactions take place under these arrangements, the effect of the relief is to bring the amount of LBTT payable on the purchase of a property using these arrangements in line with the amount of tax that would be due where a purchase is made using a conventional mortgage product. This parity is achieved by relieving the second transaction (the right to occupation), and the subsequent transfer(s) of the financial institution’s interest, from LBTT and disapplying the substantial performance tests in the LBTT(S)A 2013. These rules ensure that, where the arrangements are completed in the manner provided for, and all the other rules are complied with, only one LBTT charge is payable (although as explained below, in certain circumstances relief for the first transaction may also be claimed). This form of Alternative Property Finance Relief is not available:

where either group relief (see LBTT3025), reconstruction relief (see LBTT3030) or acquisition relief (see LBTT3031) is available for the first transaction or has been withdrawn from the first transaction; or

where the alternative finance arrangements involve arrangements or connected arrangements for someone to acquire control of the financial institution even if the arrangements include certain conditions.

LBTT(S)A 2013 schedule 7 paragraphs 16, 17 and 18

‘Connected arrangements’ means any arrangements entered into in connection with the making of the alternative finance arrangements (including arrangements involving one or more persons who are parties to the alternative finance arrangements). LBTT(S)A 2013 schedule 7 paragraph 19 Section 1124 of the Corporation Tax Act 2010 applies for determining who has control of the financial institution. LBTT(S)A 2013 schedule 7 paragraph 20



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The relief mechanism – The first transaction (the purchase of a major interest in land by the financial institution and person as owners in common) will generally be chargeable to LBTT but relief may be claimed by the financial institution if the seller is:

the person who enters into the arrangements (the first case); or

another financial institution by whom the interest was acquired under the arrangements described above and the arrangements were entered into between it and the person (the second case).

LBTT(S)A 2013 schedule 7 paragraph 8 Relief from LBTT may be claimed by the person on the second transaction (the agreement of the right to exclusive occupation), if all the requirements relating to the first transaction are complied with, including payment of any amount of LBTT due on the first transaction. There are no other requirements to obtaining the relief on the second transaction. LBTT(S)A 2013 schedule 7 paragraph 9 For further transactions (that is, transactions subsequent to the second transaction) – where:

the person exercises the right in the agreement to require the financial institution to transfer the interest in the property (as part of the further transaction); and

the property is transferred to that person,

then relief from LBTT may be claimed by the person on the further transaction if all the requirements relating to both the first and second transactions are complied with, and at all times between the second and further transaction:

the chargeable interest purchased under the first transaction is held by a financial institution and the person as common owners; and

the land is occupied by the person who agreed the exclusive right occupation with the financial institution.


The agreement under a further transaction is not to be treated:

as substantially performed unless and until the whole interest purchased by the financial institution under the first transaction has been transferred, (thus disapplying the rules about substantial performance); or

as the grant of an option under the rules about options and rights of pre-emption in section 12 of the LBTT(S)A 2013 (see LBTT1007).




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LBTT(S)A 2013 schedule 7 paragraph 11 A further transaction to which the relief applies is not a notifiable transaction unless the transaction involves a transfer to the person of the whole interest purchased by the institution under the first transaction so far as not transferred by a previous further transaction. LBTT(S)A 2013 schedule 7 paragraph 12 The relief is not available:

if the financial institution transfers the property to a third party not involved in the original arrangements; or

if during the time the arrangements were in place the property was not held by a financial institution and a person as owners in common.

Exempt interests An interest held by a financial institution as a result of the ‘first transaction’ (the acquisition of a major interest in land by the financial institution and the owners as common owners) is an exempt interest. Any transfer of that interest therefore incurs no tax and is not notifiable to us. The interest ceases to be an exempt interest if:

the second transaction (the agreement between the financial institution and the person under which the person has an exclusive right to occupy the land) ceases to have effect; or

the further transaction (the right of a person to require the institution to transfer the whole interest purchased by the institution under the first transaction) ceases to have effect.

The interest held by a financial institution as a result of the ‘first transaction’ is not an exempt interest if the first transaction is subject to a claim for either group relief or reconstruction and acquisition relief. The rules about exempt interests do not make either the first transaction itself or the further transaction an exempt interest. Relief will be available for these transactions, but the transactions remain notifiable to us. LBTT(S)A 2013 schedule 7 part 4 Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website.







LBTT3020 Alternative property finance relief: land sold to financial institution and re-sold to a person This relief is provided by the relevant provisions of schedule 7 to the LBTT(S)A 2013. Description of relief – This form of the relief applies where a financial institution purchases a property and re-sells it to a person, the person borrows some or all of the purchase price from the financial institution and grants a standard security to the financial institution over that property. As two land transactions take place under these arrangements, the combined effect of the reliefs is to bring the LBTT on the purchase using these arrangements in line with that payable on a purchase financed with a conventional mortgage product. The rules ensure that, where the arrangements are completed in the manner provided for, and all the other rules are complied with, only one LBTT charge is payable (although as explained below, in certain circumstances relief for the first transaction may also be claimed). Relief mechanism - For this relief to be claimed, arrangements must be entered into between a person and a financial institution as follows:

the financial institution purchases a major interest in land - the first transaction;

the institution sells that interest to the person, that is the institution sells the whole of the major interest obtained to the person - the second transaction; and

the person grants the financial institution a standard security over that interest.


The first transaction (the purchase of a major interest in land by the financial institution) will generally be chargeable to LBTT but relief may be claimed by the financial institution if the seller is:

the person who enters into the arrangements (the first case); or

another financial institution by whom the interest was acquired under arrangements described above and the arrangements were entered into between it and the person (the second case).

LBTT(S)A 2013 schedule 7 paragraph 14 Relief from LBTT may be claimed on the second transaction (the re-sale of the property by the financial institution to the person) if all the requirements relating to the first transaction are complied with. This includes payment of any LBTT due on the first transaction.





LBTT(S)A 2013 schedule 7 paragraph 15 Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website.





LBTT3021 Relief for alternative finance investment bonds This relief is provided by the provisions of schedule 8 to the LBTT(S)A 2013. Additional guidance is also available in relation to alternative finance investment bonds relief, covering:

Rules relating to relief for alternative finance investment bonds where one bond asset is substituted for another – LBTT3022; and

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

Description of relief – To ensure that land transactions funded by means of alternative finance investment bond (AFIB) are not taxed more than once, relief from LBTT is available subject to the satisfaction of certain conditions. AFIBs include certain Islamic structured financial instruments (referred to as ‘sukuk’) that are compliant with the Shari’a law prohibition on paying or receiving interest. When an AFIB is used, the property being acquired is transferred by the buyer to a bond-issuer (‘the first transaction’) to be held by the bond-issuer for the purpose of issuing an AFIB until the termination of the bond (no later than 10 years). When the bond is terminated, the ownership of the land reverts (‘the second transaction’). For the purpose of generating income or gains for the bond, the bond-issuer and the original owner enter into a leaseback agreement. For LBTT, the bond-holder of an AFIB is not treated as having an interest in the bond assets; similarly, the bond-issuer under such a bond is not treated as a trustee of the bonds assets. For the purposes of the relief, the meaning of alternative finance investment bond and interpretation of bond assets, bond holder, bond issuer and capital within LBTT have the same meaning given in section 564G of the Income Tax Act 2007. LBTT(S)A 2013 schedule 8 paragraphs 1-4 Relief not available where the bond-holder acquires control of underlying asset AFIB relief is not available if control of the underlying asset is acquired by either the bond-holder or a group of connected bond-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 includes the right of management and control of the assets; and


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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-holder.


Relief not available if purpose of arrangements is improper AFIB relief is not available for the first transaction or the second transaction if the arrangements between the buyer and the financial institution referred to in condition A below are not effected for genuine commercial reasons or if they form part of arrangements where the main purpose, or one of the main purposes, of those arrangements is the avoidance of tax. LBTT(S)A 2013 schedule 8 paragraph 26 The relief mechanism - there are seven conditions that apply to the relief: LBTT(S)A 2013 schedule 8 paragraph 7

A. The buyer and the financial institution enter into arrangements where the buyer transfers to the financial institution a qualifying interest in land (the first transaction) and both agree that the financial institution will transfer the interest to the buyer when the consideration is repaid.

LBTT(S)A 2013 schedule 8 paragraph 8 A lease of 21 years or less is not a qualifying interest.


B. The financial institution either enters into an AFIB before or after entering into the first transaction and the interest in land is held by the financial institution as a bond asset.


C. To generate income or gains for the AFIB, the financial institution and the buyer enter into a leaseback agreement, or alternative conditions specified by regulations are met. The buyer and financial institution enter into a leaseback agreement if the financial institution grants a lease or sub-lease of the property.


D. Before the end of 120 days beginning with the effective date of the first transaction, the financial institution provides us with the prescribed evidence that a satisfactory standard security has been registered in the Land Register of Scotland.









The security is satisfactory if it is a security ranking first over the property and is in our favour for the total tax payable, including any interest and penalties, which would have been due if relief was not available on the first transaction. ‘Prescribed evidence’ in this context is:

any document provided by the Keeper of the Registers of Scotland confirming the creation and registration of a standard security in our favour; and

the Unique Reference Number (URN) for the LBTT return on which relief from the tax was claimed on the transfer of the land from the original owner (the buyer mentioned in condition A) to the bond-issuer. The URN is provided upon submission of the LBTT return.

LBTT(S)A 2013 schedule 8 paragraph 11 Regulation 16 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014

E. Before the termination of the bond, the total capital payments made to the financial institution is not less than 60% of the value of the interest in the land at the time of the first transaction.


F. The financial institution holds the interest in land as a bond until the termination of that bond.


G. Once the interest in land ceases to be held by the financial institution as a bond asset, the interest is transferred to the buyer within 30 days (the second transaction). The second transaction must also be effected within 10 years (or another period specified by regulations) of the first transaction.

LBTT(S)A 2013 schedule 8 paragraph 14 The relief: first transaction The relief can be claimed for the first transaction if it relates to an interest in land in Scotland and conditions A to C above are met within 30 days of the effective date. LBTT(S)A 2013 schedule 8 paragraph 15


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Withdrawal of relief The relief is withdrawn if the interest held by the financial institution is transferred to the buyer without conditions E and F being met, or these conditions are not met within 10 years (or another period specified by regulations) of the first transaction. The relief is also withdrawn if condition D is not met or it becomes apparent that for any reason conditions E to G cannot or will not be met. LBTT(S)A 2013 schedule 8 paragraph 16 Amount of tax chargeable where the relief is withdrawn. Where the relief is withdrawn, the amount of tax chargeable is based on the chargeable consideration of the first transaction (but for the relief). The chargeable consideration for that transaction is the amount of tax that would have been chargeable based on the market value of the subject-matter in the transaction or, if the acquisition was the grant of a lease, the rent. LBTT(S)A 2013 schedule 8 paragraphs 17 and 18 The relief: second transaction The relief can be claimed for the second transaction if all the conditions are met and the relief was claimed and accepted for the first transaction. LBTT(S)A 2013 schedule 8 paragraph 19 Discharge of security when conditions for relief are met. If after the effective date of the second transaction the financial institution provides us with the appropriate evidence that conditions A to C and E to G have been met, we must register a discharge of security within 30 days in the Land Register of Scotland. Where security is discharged as above, we must register a discharge of security within 30 days of the bond-issuer providing the appropriate evidence. The discharge must be registered in the Land Register of Scotland. LBTT(S)A 2013 schedule 8 paragraph 23 ‘Prescribed evidence’ in this context is:

a statement from the bond-issuer, or a person authorised to act on behalf of the bond-issuer, that all of conditions A to C and E to G in Part 3 of schedule 8 have been met;


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the Unique Reference Number (URN) for the LBTT return in which relief from the tax was claimed on the transfer of the land from the original owner to the bond-issuer;

the URN for the LBTT land transaction return in which relief from the tax was claimed on the transfer of the land from the bond-issuer to the original owner; and

any document as provided by the Keeper of the Registers of Scotland confirming that the land has been registered in the name of the original owner.

The URN is provided upon submission of the LBTT return. The ‘original owner’ in this context is the buyer mentioned in condition A. LBTT(S)A 2013 schedule 8 paragraphs 20 and 23 Regulation 17 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014 Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website.







LBTT3022 Rules relating to relief for alternative finance investment bonds where one bond asset is substituted for another All references below to any conditions regarding alternative finance investment bonds (AFIBs) relief are to those mentioned in LBTT3021. Substitution of a bond asset for another asset It is possible for the bond-holder to substitute one bond asset for another. Certain conditions need to be met on both the original land and the replacement land before relief for AFIBs is available in this circumstance. The mechanism which allows relief for AFIBs to be available is:

conditions A to C and G are met in relation to the original land;

the bond-issuer ceases to hold the original land as a bond asset (and, accordingly, transfers it to the bond-holder) before the termination of the alternative finance investment bond;

the bond-holder and the bond-issuer enter into further arrangements falling within condition A relating to an interest in the replacement land; and

the value of the interest in the replacement land at the time that it is transferred from the bond-holder to the bond-issuer is greater than or equal to the value of the interest in the original land at the time of the first transaction.

Further conditions in relation to the substitution of one band asset for another asset:

condition F does not need to be met in relation to the original land if conditions A, B, C, F and G are met in relation to the replacement land;

condition E applies as if the reference to the interest in the land were a reference to the interest in the original land; and

condition G applies as if the reference to the first transaction were a reference to the first transaction relating to the original land.

If the replacement land is in Scotland If the replacement land is in Scotland, the original land ceases to be subject to the security registered in pursuance of condition D when:

the bond-issuer provides us with the prescribed evidence that condition G is met in relation to the original land; and

condition D is met in relation to the replacement land.


Where security is discharged as above, we must register a discharge of security within 30 days of the bond-issuer providing the appropriate evidence. The discharge must be registered in the Land Register of Scotland. LBTT(S)A 2013 schedule 8 paragraph 23 ‘Prescribed evidence’ in this context (where the replacement land is in Scotland) means:

the URN for the LBTT return in which relief from the tax was claimed on the transfer of the land from the original owner to the bond-issuer;

the URN for the LBTT return in which relief from the tax was claimed on the transfer of the land from the bond-issuer to the original owner; and

any document as provided by the Keeper confirming that the land has been registered in the name of the original owner.

The URN is provided upon submission of the LBTT return. The ‘original owner’ in this context is the buyer mentioned in condition A. LBTT(S)A 2013 schedule 8 paragraphs 20 and 21 Regulation 18 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014 If the replacement land is not in Scotland If the replacement land is not in Scotland, the original land ceases to be subject to the security registered in pursuance of condition D when the bond-issuer provides us with the prescribed evidence that:

condition G is met in relation to the original land; and

each of conditions A to C is met in relation to the replacement land.

Where security is discharged as above, we must register a discharge of security within 30 days of the bond-issuer providing the appropriate evidence. The discharge must be registered in the Land Register of Scotland. LBTT(S)A 2013 schedule 8 paragraph 23 ‘Prescribed evidence’ in this context (where the replacement land is not in Scotland) means:

the URN for the LBTT return in which relief from the tax was claimed on the transfer of the land from the original owner to the bond-issuer;







the URN for the LBTT return in which relief from the tax was claimed on the transfer of the land from the bond-issuer to the original owner;

any document that confirms that the replacement land is not in the United Kingdom and that conditions A to C in Part 3 of schedule 8 have been met in relation to that land; and

any document as provided by the Keeper confirming that the land has been registered in the name of the original owner.

The URN is provided upon submission of the LBTT return. The ‘original owner’ in this context is the buyer mentioned in condition A.

LBTT(S)A 2013 schedule 8 paragraph 21 Regulation 19 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014 Conditions for further replacement land All of the rules above apply to further replacement land as they apply to replacement land. LBTT(S)A 2013 schedule 8 paragraph 22






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.



‘Under write’ 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



LBTT3024 Crofting community right to buy This relief is provided by the provisions of schedule 9 to the LBTT(S)A 2013. Description of relief - Where a purchase is made by a crofting community by virtue of the ‘crofting community right to buy’ full relief from LBTT may be available on that purchase. Relief conditions - The relief is only available where a chargeable transaction is entered into in pursuance of a crofting community right to buy and, under that transaction, two or more crofts are being bought. Under LBTT full relief from tax is provided. LBTT(S)A 2013 schedule 9 Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website.






LBTT3025 Group relief This relief is provided by the provisions of schedule 10 to the LBTT(S)A 2013. Additional guidance is also available in relation to group relief, covering:

Withdrawal of group relief – LBTT3027;

Circumstances where group relief is not withdrawn – LBTT3028; and

Recovery of group relief where relief has been withdrawn or partially withdrawn – LBTT3029.

Description of relief – subject to certain rules, group relief provides relief from LBTT where, at the effective date, the seller and buyer are both companies in the same group. This allows companies to move property within a corporate group structure for commercial reasons without a liability to LBTT being incurred. LBTT(S)A 2013 schedule 10 paragraph 2 Group relief reflects the wider principle enshrined in LBTT(S)A 2013 that similar things should be taxed similarly and dissimilar things should not be taxed similarly. Where a property changes hands within a group structure the effective economic interest has not changed hands, therefore LBTT(S)A 2013 does not tax the transaction as if it were a bargain struck between arms-length entities. If the buyer and seller of a chargeable interest are companies and, at the effective date of the land transaction, they are both members of the same group, relief from LBTT may be claimed by the buyer. The purchasing company may choose to pay the tax by not claiming the relief. Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website. For the purposes of this relief:

‘company’ means a body corporate;

companies are members of the same group if one is the 75% subsidiary of the other or both are 75% subsidiaries of a third company;


one company (company B) is the 75% subsidiary of another (company A) if the following conditions are met:

o Company A is beneficial owner of not less than 75% of the ordinary share

capital of company B (either directly or through another company or companies determined in accordance with sections 1155 to 1157 of the Corporation Tax Act 2010);






http://www.legislation.gov.uk/ukpga/2010/4/part/24/chapter/3



o Company A is beneficially entitled to not less than 75% of the profits available for distribution to equity holders of company B; and

o Company A would be beneficially entitled to not less than 75% of any

assets of company B available for distribution to its equity holders on a winding-up.


The detailed rules on the qualifying tests in Chapter 6 of Part 5 of the Corporation Tax Act 2010 (group relief: equity holders and profits or assets available for distribution) apply for the purposes of conditions (b) and (c) above. However sections 171(1)(b) and (3), 173, 174 and 176 to 178 of that Chapter are treated as omitted. LBTT(S)A 2013 schedule 10 paragraphs 47 and 48

‘Ordinary share capital’ means all the issued share capital of the company, by whatever name called, apart from that share capital which only confers rights to a fixed dividend with no other rights to participate in the profits of the company. LBTT(S)A 2013 schedule 10 paragraph 46 ‘Control’ is to be interpreted in accordance with sections 450 and 451 of the Corporation Tax Act 2010.

Restrictions on availability Group relief is not available to the buyer in three situations:

where at the effective date of the transaction there are arrangements in existence which mean that a person (or persons) has or could obtain control of the buyer but not of the seller. It does not matter whether the arrangements are actually used to obtain control. However this restriction does not apply if:

o there are arrangements entered into for the purpose of acquiring shares by a company and Stamp Duty acquisition relief under section 75 of the Finance Act 1986 applies and the conditions will be met for a claim to be made, and as a result of the arrangement, the buyer will be a member of the same group as the acquiring company; and

o there are arrangements, one of the purposes of which is to facilitate the transfer of the whole or part of the business of one company to another, Stamp Duty demutualisation of insurance companies (section 96 of the Finance Act 1997) is intended to apply and the conditions for that relief are intended to be met.

LBTT(S)A 2013 schedule 10 paragraphs 3, 4, 9 and 10

http://www.legislation.gov.uk/asp/2013/11/schedule/10/part/4/crossheading/when-is-a-company-a-subsidiary-of-another-company/prospective



http://www.legislation.gov.uk/asp/2013/11/schedule/10/part/4/crossheading/when-is-a-company-a-subsidiary-of-another-company/prospective


http://www.legislation.gov.uk/ukpga/2010/4/part/10/chapter/2/crossheading/meaning-of-other-expressions-in-this-part








where a purpose of the transaction is connected to arrangements under which the consideration is provided or received directly or indirectly by a person other than a group company. (A ‘group company’ is a company that at the effective date of the transaction is a member of the same group as the buyer and the seller). This also applies when the arrangements mean that part of the consideration is provided or received as a consequence of the carrying out of a transaction (or transactions) involving a payment (or payments) or receipt (or receipts) by a person other than a group company; and

where a purpose of the transaction is connected to arrangements under which the buyer ceases (or could cease) to be in the same group as the seller by virtue of ceasing to be a 75% subsidiary of the seller or third party company. However this rule does not apply if there are arrangements, one of the purposes of which is to facilitate the transfer of the whole or part of the business of one company to another, to which the provisions on Stamp Duty in respect of demutualisation of insurance companies in section 96 of Finance Act 2007 are intended to apply, and the conditions for that relief are intended to be met.

LBTT(S)A 2013 schedule 10 paragraphs 5, 6, 10 and 11

A targeted anti avoidance rule also applies whereby the relief is not available where the transaction is:

not effected for bona fide commercial reasons; or

forms part of arrangements where the main purpose or one of the main purposes of which is the avoidance of a tax liability.







LBTT3026 Withdrawal of group relief Group relief (see LBTT3025) is withdrawn if the buyer ceases to be a member of the same group as the seller:

within three years beginning with the effective date of the transaction; or

in pursuance of, or in connection with, arrangements made within that three year period; and

at the time the buyer ceases to be a member of the same group the buyer holds:

the chargeable interest that was acquired under the relevant transaction, or a chargeable interest derived from the chargeable interest acquired under the transaction; and (in either case)

the chargeable interest has not subsequently been acquired at market value where group relief was available but not claimed.

LBTT(S)A 2013 schedule 10 paragraphs 13, 14 and 15 Amount of tax chargeable where group relief is withdrawn Where group relief is withdrawn, the LBTT payable is what would have been payable in respect of the original land transaction. The chargeable consideration for the transaction is calculated as the market value of the chargeable interest transferred by the original land transaction or rent in a transaction involving leases. LBTT(S)A 2013 schedule 10 paragraphs 16 and 17 Amount of tax chargeable where group relief is partially withdrawn Where group relief is partially withdrawn, the LBTT payable is an appropriate proportion of the original land transaction for which group relief was claimed. The appropriate proportion must reflect the proportion of market value of the chargeable interests held by the buyer at the time of withdrawal of group relief compared to the full market value of the chargeable interest obtained by the buyer at the effective date of the relevant land transaction. LBTT(S)A 2013 schedule 10 paragraphs 18 and 19 It is the responsibility of the buyer to make a LBTT return to us if group relief is withdrawn to any extent. LBTT(S)A 2013 section 33

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LBTT3027 Cases where group relief is not withdrawn Cases where group relief is not withdrawn: Winding up Group relief is not withdrawn when the buyer ceases to be a member of the same group as the seller in the course of, or for the purposes of, winding up the seller or another company that is above the seller in the group structure. A company is above the seller in the group structure if the seller (or another company above the seller in the group structure) is a 75% subsidiary of the company. LBTT(S)A 2013 schedule 10 paragraph 20 LBTT(S)A 2013 schedule 10 paragraph 41 Cases where group relief is not withdrawn: stamp duty reliefs There are two instances where LBTT group relief is not withdrawn when certain stamp duty reliefs apply. 1. Group relief is not withdrawn where the buyer ceases to be a member of the same group as the seller because of an acquisition of shares by another company (the acquiring company) in relation to which:

Section 75 of the Finance Act 1986 (stamp duty: acquisition relief) applies and the conditions for group relief under that section are met; and

immediately after that acquisition, the buyer is a member of the same group as the acquiring company.

LBTT(S)A 2013 schedule 10 paragraph 21 2. Group relief is not withdrawn where the buyer ceases to be a member of the same group as the seller because of the transfer of the whole or part of the seller’s business to another company (the acquiring company) in relation to which:

Section 96 of the Finance Act 1997 (stamp duty: demutualisation of insurance companies relief) applies and the conditions for group relief under that section are met; and

immediately after that acquisition, the buyer is a member of the same group as the acquiring company.

LBTT(S)A 2013 schedule 10 paragraph 22 However, in both of these instances, withdrawal of the relief rules will apply if:








the buyer ceases to be a member of the same group as the acquiring company within three years of the effective date of the transaction or in the pursuance of, or in connection with, arrangements made before the end of a three year period beginning with the effective date of the transaction for which group relief was claimed (the ‘relevant transaction’); and

at the time the buyer ceases to be a member of the same group as the acquiring company, it or a relevant associated company holds a chargeable interest that was acquired by the buyer under the relevant transaction or is derived from a chargeable interest acquired by the buyer under the relevant transaction and that has not subsequently been acquired at market value under a chargeable interest for which group relief was available but not claimed.

LBTT(S)A 2013 schedule 10 paragraphs 23, 24 and 25 A ‘relevant associated company’, in relation to the buyer, means a company that:

is a member of the same group as the buyer immediately before the buyer ceases to be a member of the same group as the seller; and

ceases to be a member of the same group as the seller in consequence of the buyer so ceasing.


Cases where group relief is not withdrawn: seller leaves the group Group relief is not withdrawn where the buyer ceases to be a member of the same group as the seller because the seller leaves the group. The seller is regarded as leaving the group if the buyer and seller cease to be members of the same group due to a transaction relating to shares in:

the seller; or

another company that is above the seller in the group structure and that, as a result of the transaction, ceases to be a member of the same group as the buyer.

A company is above the seller in the group structure if the seller (or another company above the seller in the group structure) is a 75% subsidiary of the company. However if there is a change of control of the buyer after the seller leaves the group, group relief is withdrawn as if the buyer had ceased to be a member of the same group as the seller. This rule does not apply where the change of control of the buyer takes place because a loan creditor (defined by section 453 of the Corporation Tax Act 2010)

http://www.legislation.gov.uk/asp/2013/11/schedule/10/part/3/crossheading/cases-where-relief-not-withdrawn-stamp-duty-reliefs/prospective




obtains control of or ceases to control the buyer and the other persons who controlled the buyer before the change continue to do so. A change in control of the buyer occurs if:

a person who controls the buyer (alone or with others) ceases to do so;

a person obtains control of the buyer (alone or with others); or

the buyer is wound up.

However a person does not control or obtain control of the buyer if that person is under the control of another person or persons. LBTT(S)A 2013 schedule 10 paragraphs 26 to 31 Withdrawal of relief in certain cases involving successive transactions Some of the withdrawal provisions previously mentioned were got round by various manoeuvres variously described as ‘bungee’ or ‘drop and bounce’ schemes. Paragraphs 32-40 of schedule 10 to the LBTT(S)A 2013 were introduced as highly technical anti-avoidance provisions to counteract these schemes. We consider that such schemes might now fall to be counteracted under the Scottish GAAR (see RSTP8001). With this in mind, where the following four conditions are met, the rules about withdrawal of group relief apply to a relevant transaction (i.e. a transaction for which group relief was claimed) as if the seller in relation to the earliest previous transaction was the seller in relation to the relevant transaction: 1. There is a change in control of the buyer. This first condition does not apply

where:

there is a change in the control of the buyer because a loan creditor (within the meaning given by section 453 of the Corporation Tax Act 2010) obtains control of, or ceases to control, the buyer; and

the other persons who controlled the buyer before the change continue to do so.

LBTT(S)A 2013 schedule 10 paragraphs 32, 33 and 38

2. The change occurs:

before the end of the period of 3 years beginning with the effective date of the transaction which is exempt from charge by virtue of this schedule (‘the relevant transaction’); or

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in pursuance of, or in connection with, arrangements made before the end of that period.


3. The relief in relation to the relevant transaction would not be withdrawn on the previous transaction by the buyer ceasing to be a member of the same group as the seller (see LBTT3026).

LBTT(S)A 2013 schedule 10 paragraph 35 4. In relation to any previous transaction:

the previous transaction is exempt from charge by virtue of group relief (see LBTT3025), reconstruction relief (see LBTT3030) or acquisition relief (see LBTT3031);

the effective date of the previous transaction is less than three years before the date of the change mentioned in the first condition;

the chargeable interest acquired under the relevant transaction by the buyer in relation to that transaction is the same as, comprises, forms part of, or is derived from, the chargeable interest acquired under the previous transaction by the buyer in relation to the previous transaction; and

since the previous transaction, the chargeable interest acquired under that transaction has not been acquired by any person under a transaction that is not exempt from charge by virtue of group relief (see LBTT3025), reconstruction relief (see LBTT3030) or acquisition relief (see LBTT3031).


If two or more transactions effected at the same time are the earliest previous transactions the reference above to the seller in relation to the earliest previous transaction is a reference to the persons who are the sellers in relation to the earliest previous transactions. LBTT(S)A 2013 schedule 10 paragraph 39 There is a change in the control of a company if:

a person who controls the company (alone or with others) ceases to do so;

a person obtains control of the company (alone or with others); or

the company is wound up.








LBTT3028 Recovery of group relief where relief has been withdrawn or partially withdrawn Once the LBTT due as a result of a withdrawal of group relief has been determined (see LBTT3026), liability to pay the tax is the responsibility of the buyer. To enable such a recovery, we must serve notice on the buyer. The notice:

requires the unpaid amount of tax to be paid within 30 days of the service of the notice;

must be served before the end of the period of three years beginning with the date on which the tax was finally determined;

must state the amount of tax to be paid by the person on whom it is served;

is to be treated as if it were a Revenue Scotland assessment (see RSTP1008) and the tax was due from the person on whom it was served; and

has effect for recovery of the tax and any interest on the unpaid tax and also for the purposes of appeals.

Where such tax (or any part of it) has not been paid within a period of six months of the date on which it became payable, recovery of the unpaid amount is possible from other persons. LBTT may then be recovered from:

the seller;

any company which at any relevant time was a member of the same group as the buyer and was above it in the group structure; or

any person who at any relevant time was a controlling director of the buyer or of a company having control of the buyer.

When someone other than the buyer has paid the tax (and interest), that person is legally entitled to recover the amount that was paid from the buyer. No deduction for the amount of LBTT paid as relief withdrawn is allowed in calculating any income, profits or losses for any tax purpose.

For these purposes,

a ‘relevant time’ means any time between the effective date of the relevant transaction and the date the buyer ceased to be a member of the same group as the seller;

a company (A Ltd) is above another company (B Ltd) in a group structure if B Ltd (or another company that is above B Ltd in the group structure) is a 75% subsidiary of A Ltd;



‘director’ (in relation to a company) has the meaning given by section 67(1) of the Income Tax (Earnings and Pensions) Act 2003 and includes any person falling within section 452(1) of the Corporation Tax Act 2010; and

‘controlling director’ (in relation to a company) means a director of the company who has control of the company in accordance with sections 450 and 451 of the Corporation Tax Act 2010.

LBTT(S)A 2013 schedule 10 paragraphs 42A to 42K (inserted by paragraph 9(20(b) of schedule 4 to the RSTPA 2014)






http://www.legislation.gov.uk/asp/2014/16/schedule/4/crossheading/land-and-buildings-transaction-tax-scotland-act-2013



LBTT3029 Reconstruction relief and acquisition relief Guidance on reconstruction relief and acquisition relief, including the circumstances in which either relief can be withdrawn and recovered by us, is provided as follows:

Reconstruction relief – LBTT3030

Acquisition relief – LBTT3031

Withdrawal of reconstruction or acquisition relief – LBTT3032

Recovery of reconstruction or acquisition relief where relief has been

withdrawn or partially withdrawn – LBTT3033


LBTT3030 Reconstruction relief This relief is provided by the relevant provisions of Part 2 of schedule 10 to the LBTT(S)A 2013. Guidance on the withdrawal and recovery of reconstruction relief is available separately, see LBTT3032 and LBTT3033 respectively. Description of relief - Reconstruction relief may be claimed, subject to certain conditions, when a company acquires the whole or part of an undertaking in another company under a scheme of reconstruction. This relief allows land and buildings to be transferred between two companies, as part of a transfer of an undertaking in exchange for shares, where there is no change of ownership, for example, where a company decides to split an existing business, which is carried on by one company, into two businesses carried on by two companies. Relief conditions – all four of the qualifying conditions must be met for reconstruction relief to apply:

1. The acquiring company must acquire the whole or part of the target company for the purposes of the reconstruction of the target company.

2. The consideration for the acquisition of the whole or part of the target company must consist wholly or partly of the issue of non-redeemable shares in the acquiring company to all shareholders of the target company. If the consideration consists partly of non-redeemable shares, this condition is met only if the rest of the consideration consists wholly of the assumption or discharge by the acquiring company of the liabilities of the target company.

3. After the acquisition is made, each shareholder of each company must also be a shareholder in the other company and every shareholder must hold the same, or nearly the same (see below), proportion of shares of both companies. The intention of this condition is to try and get the beneficial share ownership of the two companies the same as of the target company before the reconstruction. The existence of options, share warrants, different classes of shares with different rights and the states of the share registers can make absolute mirror image impossible hence ‘nearly the same’.

4. The acquisition must take place for bona fide commercial reasons and must not form part of an arrangement the main purpose or one of the main purposes of which is to avoid LBTT.

If immediately before the acquisition, the acquiring company or the target company holds any of its own shares, the shares are treated as having been cancelled before the acquisition for the purpose of conditions 2 and 3, so the company is to be treated as if it were not a shareholder of itself.




LBTT3031 Acquisition relief This relief is provided by the relevant provisions of Part 3 of schedule 10 to the LBTT(S)A 2013. Guidance on the withdrawal and recovery of acquisition relief is available separately, see LBTT3032 and LBTT3033 respectively. Description of relief – Acquisition relief is a partial relief and may be claimed, subject to certain conditions, where land or buildings are transferred as part of the acquisition of an undertaking of a company. Relief conditions – all five of the qualifying conditions below must be met for acquisition relief to apply:

1. The acquiring company must acquire the whole or part of the undertaking of another ‘target’ company.

2. The consideration for the acquisition of the whole or part of the target

company must consist wholly or partly of the issue of non-redeemable shares in the acquiring company to either the target company or any or all of the target company’s shareholders. If the consideration consists partly of non-redeemable shares, this condition is met only if the rest of the consideration consists wholly of:

cash not exceeding 10% of the nominal value of the non-redeemable shares that were issued;

the assumption or discharge by the acquiring company of liabilities of the target company; or

both of the above.

3. The acquiring company must not be associated with another company that is a party to arrangements with the target company relating to shares of the acquiring company issued in connection with the acquisition of the target company. In this context, companies are ‘associated’ if one has control of the other, or both are controlled by the same person or persons. ‘Control’ is determined by reference to section 1124 of the Corporation Tax Act 2010.

4. The main activity of the target company or the part of it being acquired must

not consist of dealing in chargeable interests.

5. The acquisition must take place for bona fide commercial reasons and must not form part of an arrangement the main purpose or one of the main purposes of which is to avoid LBTT.

The relief mechanism – The amount of acquisition relief available is 87.5% of the total tax that would be payable on the transaction without the relief, applying the tax rates and bands to the chargeable consideration in the usual way.





So the amount of tax due is 12.5% of the total tax that would otherwise be payable on the transaction. The Land and Buildings Transaction Tax (Prescribed Proportions) (Scotland) Order 2014 Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website.

http://www.legislation.gov.uk/ssi/2014/350/article/3/made

http://www.legislation.gov.uk/ssi/2014/350/article/3/made




LBTT3032 Withdrawal of reconstruction or acquisition relief The withdrawal (or partial withdrawal) of reconstruction relief (see LBTT3030) or acquisition relief (see LBTT3031) is provided by the relevant provisions of Part 4 of schedule 10 to the LBTT(S)A 2013. Reconstruction or acquisition relief is withdrawn or partially withdrawn:

where control of the acquiring company changes within three years of the effective date of the transaction for which reconstruction or acquisition relief was claimed (the ‘relevant transaction’); or

if there are arrangements put in place within that period which result in a change of control after the three year period.

This rule applies where at the time control of the acquiring company changes, the acquiring company or one associated with it holds a chargeable interest that was acquired by the acquiring company under the relevant transaction or a chargeable interest derived from it. That chargeable interest must not have been subsequently acquired at market value under a chargeable transaction in which reconstruction and acquisition relief was available but not claimed. For the purposes of the withdrawal of the relief, control of a company changes when the company becomes controlled by:

a different person;

a different number of persons; or

two or more persons at least one of whom is not the person, or one of the persons, by whom the company was previously controlled.

Companies are members of the same group if one is the 75% subsidiary of the other or both are 75% subsidiaries of a third company. A company (A) is the 75% subsidiary of another company (B) if B:

is beneficial owner of not less than 75% of the ordinary share capital of A;

is beneficially entitled to not less than 75% of any profits available for distribution to equity holders of A; and

would be beneficially entitled to not less than 75% of any assets of A available for distribution to its equity holders on a winding up.

Chapter 6 of Part 5 of the Corporation Tax Act 2010 (group relief: equity holders and profits or assets available for distribution applies to (b) and (c) above as it applies to section 151 (4)(a) and (b) of that Act but sections 171(1)(b) and (3), 173, 174, and 176-178 are to be disregarded.





Amount of tax chargeable when relief is withdrawn - Where relief is withdrawn, the amount tax chargeable is the amount of tax that would have been chargeable in relation to the relevant transaction but for the relief if the chargeable consideration had been the market value of the subject matter of the transaction or in the case of the grant of a lease, the rent. Amount of tax chargeable when relief is partially withdrawn - Where relief is partially withdrawn, the amount of tax chargeable is an appropriate proportion of the amount of tax chargeable when relief is withdrawn in full, taking into account the subject matter of the relevant transaction and what is held by the acquiring company and if applicable, any associated companies. However, the relief is not withdrawn or partially withdrawn where control of the acquiring company changes as a result of:

a share transaction that takes place in connection with a divorce, nullity of marriage, judicial separation or dissolution of a civil partnership;

a share transaction that takes place in connection with a person’s death that that varies a disposition of property and meets the conditions of that exemption from LBTT;

an exempt intra-group transfer (but see the rules about ‘Withdrawal of relief on subsequent non-exempt transfer’). An exempt intra-group transfer means a transfer of shares effected by an instrument that is exempt from Stamp Duty under section 42 of the Finance Act 1930 or section 11 of the Finance Act (Northern Ireland) 1954;

a transfer of shares to another company in relation to which share acquisition relief applies – but see the rules about ‘Withdrawal of relief where share acquisition relief applied but control of company subsequently changes’; or

a loan creditor becoming, or ceasing to be, treated as having control of the company and the other persons who were previously treated as controlling the company continue to do so.

Withdrawal of relief on subsequent non-exempt transfer Reconstruction or acquisition relief is withdrawn or partially withdrawn if control of the acquiring company changes as a result of an exempt intra-group transfer and:

a company holding shares in the acquiring company to which the exempt intra-group transfer related (or that are derived from shares to which the transfer related) ceases to be a member of the same group as the target company within three years of the effective date of the transaction for which reconstruction or acquisition relief was claimed or in connection with arrangements made within that three year period; and

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where the acquiring company or a relevant associated company holds a chargeable interest that was transferred to the acquiring company by the relevant transaction (or that is derived from an interest transferred) and the chargeable interest has not been subsequently transferred at market value under a chargeable transaction for which reconstruction and acquisition relief was available but not claimed.

Withdrawal of relief where share acquisition relief applied but control of company subsequently changes Reconstruction or acquisition relief is withdrawn or partially withdrawn if control of the acquiring company changes as a result of a transfer of shares to another company in relation to which share acquisition relief applies and:

control of the other company changes within three years of the effective date of the relevant transaction or in connection with arrangements made within that three year period;

at the time that control of the other company changes it holds shares transferred to it as a consequence of the transfer of shares from the acquiring company (or any shares derived from that transfer of shares); and

at that time the acquiring company or a relevant associated company holds a chargeable interest that was transferred to the acquiring company by the relevant transaction (or that is derived from an interest transferred) and the chargeable interest has not been subsequently transferred at market value under a chargeable transaction for which reconstruction or acquisition relief was available but not claimed.


LBTT3033 Recovery of reconstruction or acquisition relief where relief has been withdrawn or partially withdrawn Once the LBTT due as a result of a withdrawal of reconstruction or acquisition relief has been determined (see LBTT3032), liability to pay the tax is the responsibility of the acquiring company. To enable such a recovery, we must serve notice on the acquiring company. The notice:

requires the unpaid amount of tax to be paid within 30 days of the service of the notice;

must be served before the end of the period of three years beginning with the date on which the tax was finally determined;

must state the amount of tax to be paid by the person on whom it is served;

is to be treated as if it were a Revenue Scotland assessment (see RSTP1008) and the tax was due from the person on whom it was served; and

has effect for recovery of the tax and any interest on the unpaid tax and also for the purposes of appeals.

When the person on whom a notice was served has paid the tax (and interest), that person is legally entitled to recover the amount he or she paid from the buyer. No deduction is allowed in calculating any income, profits or losses for any tax purpose for the amount so paid. Where such tax (or any part of it) has not been paid within a period of six months of the date on which it became payable, recovery of the unpaid amount is possible from other persons. The persons from whom the LBTT may be recovered are:

a company which at any relevant time was a member of the same group as the acquiring company and was above it in the group structure; and

any person who at any relevant time was a controlling director of the acquiring company or of a company having control of the acquiring company.

When someone other than the acquiring company has paid the tax (and interest), that person is legally entitled to recover the amount that was paid from the acquiring company. No deduction for the amount of LBTT paid as relief withdrawn is allowed in calculating any income, profits or losses for any tax purpose.



For these purposes:

a ‘relevant time’ means any time between the effective date of the relevant transaction and the date of change of control by virtue of which tax is chargeable;

a company (A Ltd) is above another company (B Ltd) in a group structure if B Ltd (or another company that is above B Ltd in the group structure) is a 75% subsidiary of A Ltd;

‘director’ (in relation to a company) has the meaning given by section 67(1) of the Income Tax (Earnings and Pensions) Act 2003 (read with subsection (2) of that section) and includes any person falling within section 452(1) of the Corporation Tax Act 2010;

‘controlling director’ (in relation to a company) means a director of the company who has control of the company in accordance with sections 450 & 451 of the Corporation Tax Act 2010.

LBTT(S)A 2013 schedule 11 paragraphs 35A to 35K (inserted by paragraph 9(21(d) of schedule 4 to the RSTPA 2014)










LBTT3034 Relief for incorporation of limited liability partnership This relief is provided by the provisions of schedule 12 to the LBTT(S)A 2013 Description of relief - This relief may be claimed on a transaction which transfers a chargeable interest from a person (the transferor) to a limited liability partnership in connection with its incorporation, if certain conditions are met. A limited liability partnership means one formed under the Limited Liability Partnerships Act 2000 or the Limited Liability Partnerships Act (Northern Ireland) 2002. Relief conditions - The four conditions are:

1. that the effective date of the land transaction is not more than one year after the date of incorporation of the limited liability partnership;

2. that at the relevant time, the transferor is a partner in a partnership or holds the chargeable interest transferred as nominee or bare trustee for one or more of the partners in such a partnership;

3. that at the relevant time, the partnership mentioned in condition 2 is comprised of all the persons who are (or are to be) members of the limited liability partnership (and no-one else); and

4. that the proportions of the interests held by the partners are the same both before and after the transaction or, where they are different, the differences have not arisen as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of liability to LBTT.

In conditions 2 and 3 above, the ‘relevant time’ means:

where the transferor acquired the chargeable interest after the limited liability partnership was incorporated, the time immediately after the chargeable interest was acquired; and

otherwise, immediately before the limited liability partnership was incorporated.





http://www.legislation.gov.uk/nia/2002/12/contents





LBTT3035 Charities relief This relief is provided by the provisions of schedule 13 to the LBTT(S)A 2013. Description of relief – where the buyer in a land transaction is a charity and certain conditions are met, relief from LBTT may be claimed. The relief is available to charitable trusts in the same way that it applies to other forms of charity. A charity or charitable trust cannot claim relief if it acquires a property jointly with a non-charity. Relief conditions – Both of the qualifying conditions must be met for charities relief to be claimed:

the charity or a charitable trust must hold or intend to hold the subject matter of the land transaction (or the greater part of it) for qualifying charitable purposes; and

the transaction must not be entered into for the purpose of the buyer or any other person avoiding LBTT.

LBTT(S)A 2013 schedule 13 paragraph 2 What are ‘qualifying charitable purposes’? – A property is held by a charity for qualifying charitable purposes if it is used by that charity or another charity for charitable purposes or as an investment from which the profits are used to further the charitable purposes of the buyer. ‘Qualifying charitable purposes’ does not, however, include co-investment by a charity in land and buildings with another party that is not a charity, such as a company. There is no partial relief available for charities jointly buying land and buildings with organisations that are not charities or charitable trusts. LBTT(S)A 2013 schedule 13 paragraph 3 What are ‘charitable purposes’? – For the purposes of this relief, ‘charitable purposes’ means:

a. the prevention or relief of poverty;

b. the advancement of education;

c. the advancement of religion;

d. the advancement of health;

e. the saving of lives;

f. the advancement of citizenship or community development;





g. the advancement of the arts, heritage, culture or science;

h. the advancement of public participation in sport;

i. the provision of recreational facilities, or the organisation of recreational

activities, with the object of improving the conditions of life for the persons for whom the facilities or activities are primarily intended;

j. the advancement of human rights, conflict resolution or reconciliation;

k. the promotion of religious or racial harmony;

l. the promotion of equality and diversity;

m. the advancement of environmental protection or improvement;

n. the relief of those in need by reason of age, ill-health, disability, financial hardship or other disadvantage;

o. the advancement of animal welfare; or

p. any other purpose that may reasonably be regarded as analogous to any of the preceding purposes.

This definition is the same as that provided in section 7(2) of the Charities and Trustee Investment (Scotland) Act 2005. What is a charity? Charities registered in Scotland: Bodies registered in the Scottish Charity Register held by the Office of the Scottish Charity Regulator (OSCR: www.oscr.org.uk) may claim LBTT charities relief. Other bodies: Charities relief is also available to bodies which are managed or controlled outside Scotland and whose purposes consist only of one or more of the charitable purposes listed in (a) to (p) above. Such bodies must be established under law in either the rest of the UK, another EU member State, Norway, Iceland or Liechtenstein. Such a body that is acquiring land or buildings in Scotland may be required to register with OSCR if it has not done so already. Guidance is available from OSCR about whether a body needs to register (see, in particular, section 4.2 of the guidance).

LBTT(S)A 2013 schedule 13 paragraphs 15 to 17



http://www.oscr.org.uk/

http://www.oscr.org.uk/publications-and-guidance/seeking-charitable-status-for-cross-border-charities/



What is a charitable trust? As noted above, the relief is available to charitable trusts in the same way that it applies to charities. References to charities therefore also refer to charitable trusts. A charitable trust is a trust of which all the beneficiaries are charities or a unit trust scheme in which all the unit holders are charities. LBTT(S)A 2013 schedule 13 paragraphs 12 to 14 Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website. Withdrawal of the relief – charities relief is withdrawn or partially withdrawn if:

a disqualifying event occurs within three years of the effective date of the transaction for which charities relief was claimed (the ‘relevant transaction’); or

if the disqualifying event occurs after that 3 year period as a result of an arrangement put in place during that 3 year period, and

at the time the disqualifying event occurs, the charity holds a chargeable interest acquired under the relevant transaction or holds a chargeable interest that is derived from the interest acquired under the relevant transaction. A disqualifying event is either:

the charity ceases to be established for charitable purposes only, or

the land, or buildings acquired under the relevant transaction, or any interest or right derived from it, is used or held for purposes other than qualifying charitable purposes.

Where only part of the land or buildings was acquired by the charity for charitable purposes, the following transactions are also considered to be disqualifying events:

any transfer by the charity of the whole or any part of the subject matter of the relevant transaction to a party that is not a charity; or

any grant by the charity at a premium (i.e. where there is consideration other than rent) of a low-rental lease (i.e. less than £1,000 per year) of the whole or any part of the subject matter of the relevant transaction to a party that is not a charity.

If either of the above applies, the date of the disqualifying event is the effective date of the transfer or grant, and when deciding whether a disqualifying event has taken place, the chargeable interests held by the charity at the time of the disqualifying





event are considered. When deciding the amount of relief partially withdrawn, the chargeable interests held by the charity immediately before the disqualifying event are considered. Where a disqualifying event occurs, the charity must make a further LBTT return to us. The return must identify how much tax is chargeable. Where relief is withdrawn, the amount of tax chargeable is the amount that would have been chargeable for the transaction but for the relief or, where relief is partially withdrawn, an appropriate proportion of that amount. The appropriate proportion is calculated having regard to:

what was acquired in the relevant transaction and is still held by the charity; and

what is being used by the charity for non-charitable purposes. The LBTT return must be made before the end of 30 days beginning with the day after the day that the event occurred. LBTT(S)A 2013 schedule 13 paragraphs 4 to 11



LBTT3036 Friendly societies relief

This relief is provided by the provisions of schedule 13A to the LBTT(S)A 2013 which is inserted by regulation 2(2)(a) of The Land and Buildings Transaction Tax (Addition and Modification of Reliefs) (Scotland) Order 2015 (Note: This is currently draft legislation). Description of relief – In certain situations (see further below), full relief can be claimed for a land transaction involving friendly societies. 'Friendly society' in this context takes the meaning given under section 116 of the Friendly Societies Act 1992: ‘an incorporated friendly society or a registered friendly society’. The general concept of a friendly society is that the society’s members contribute to a fund to be used for the welfare of the members or for their assistance when in need or distress. Relief conditions - A land transaction effected by or in consequence of any of the following is exempt from charge:

an amalgamation of two or more registered societies under section 82 of the

Friendly Societies Act 1974 (amalgamation and transfer of engagements);

an amalgamation of two or more friendly societies under section 85 of the

Friendly Societies Act 1992 (amalgamation of friendly societies);

a transfer of engagements between registered societies under section 82 of

the Friendly Societies Act 1974;

a transfer of engagements between friendly societies under section 86 of the

Friendly Societies Act 1992 (transfer of engagements by or to friendly

society); or

a transfer of the engagements of a friendly society pursuant to a direction

given by the appropriate authority under section 90 of the Friendly Societies

Act 1992.

‘The appropriate authority’ has the meaning given by section 119(1) of the Friendly

Societies Act 1992.

‘Registered’, in relation to a friendly society, has the meaning given by section 111 of

the Friendly Societies Act 1974.

http://www.legislation.gov.uk/sdsi/2015/9780111025758?view=plain



















Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT

return and pay tax' which is available separately on our website.




LBTT3037 Building societies relief This relief is provided by the provisions of schedule 13B to the LBTT(S)A 2013 which is inserted by regulation 2(2)(a) of The Land and Buildings Transaction Tax (Addition and Modification of Reliefs) (Scotland) Order 2015 (Note: This is currently draft legislation). Description of relief - In certain situations (see further below), full relief can be claimed for a land transaction involving building societies. ‘Building societies’ in this context takes the meaning given under section 119(1) of the Building Societies Act 1986: ‘a building society incorporated (or deemed to be incorporated) under that Act’ Relief conditions – A land transaction effected by or in consequence of any of the following is exempt from charge:

an amalgamation of two or more building societies under section 93 of the

Building Societies Act 1986 (amalgamations); or

a transfer of engagements between building societies under section 94 of that

Act (transfer of engagements).













LBTT3038 Relief for certain compulsory purchases This relief is provided by the provisions of schedule 14 to the LBTT(S)A 2013. Description of relief – relief from LBTT is available where a local authority makes a Compulsory Purchase Order to acquire (whether or not by agreement) a property for the purpose of development by another party, typically a property developer. As there are two transactions, in the absence of the relief, there would be two amounts of LBTT to be paid. But, so long as the development is being carried out by the property developer, the local authority can claim relief from LBTT when it buys the property under the first transaction. Relief condition – The local authority must acquire the property by means of a Compulsory Purchase Order for the purpose of facilitating the undertaking or achievement of an activity or purpose set out in section 189 of the Town and Country Planning (Scotland) Act 1997 by a third party, which is ‘the development, redevelopment or improvement of land, or any other purpose which it is necessary to achieve in the interests of the proper planning of an area in which the land is situated’. This relief is only available where a party other than a local authority develops the land. If the developer is the local authority, the relief is not available. Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website.







LBTT3039 Relief for compliance with planning obligations This relief is provided by the provisions of schedule 15 to the LBTT(S)A 2013. Description of relief – As a condition of granting planning permission to a developer, a planning authority might require the developer to provide certain amenities for the community under section 75 of the Town and Country Planning (Scotland) Act 1997. These requirements are known as 'planning obligations'. Such planning obligations may be modified in accordance with sections 75A and 75B of the same Act. In most cases the developer transfers the building to the local authority to run once it has been completed. For example, if a road is built as a planning obligation within a wider development, the developer may transfer it to the local highways authority. Subject to certain conditions, this relief is designed to relieve a public body from LBTT when it acquires a chargeable interest where the seller is complying with the planning obligation. Relief conditions – all three of the qualifying conditions must be met before the relief can be claimed:

the public body must obtain the chargeable interest from the developer in order to comply with a planning obligation imposed on the developer;

the buyer must be a public body; and

the effective date of the transaction must be within a period of 5 years beginning on the date of the planning obligation or the date that it was modified.

For the purposes of the relief, a ‘public body’ means:

a local authority;

the common services agency established under section 10(1) of the National Health Service (Scotland) Act 1978;

a health board established under section 2(1)(a) of that Act;

Healthcare Improvement Scotland established under section 10A of that Act;

a special health board established under section 2(1)(b) of that Act; or

any other body that is the planning authority for any of the purposes of the planning Acts within the meaning of the Town and Country Planning (Scotland) Act 1997.







http://www.legislation.gov.uk/ukpga/1978/29/section/10A





LBTT3040 Public Bodies relief This relief is provided by the provisions of schedule 16 to the LBTT(S)A 2013. Description of relief – where a land transaction occurs as the result of a statutory reorganisation, and both the buyer and the seller are public bodies, the buyer may claim relief from LBTT. For the purposes of the relief ‘reorganisation’ means changes involving:

the establishment, reform or abolition of one or more public bodies;

the creation, alteration or abolition of functions to be discharged by one or more public bodies; or

the transfer of functions from one public body to another. For the purposes of the relief, a ‘public body’ means:

the Scottish Ministers;

a Minister of the Crown;

the Scottish Parliamentary Corporate Body;

a local authority;

the common service agency established under section 10(1) of the National Health Service (Scotland) Act 1978;

a health board established under section 2(1)(a) of that Act;

Healthcare Improvement Scotland established under section 10A of that Act;

a special health board established under section 2(1)(b) of that Act;

any other authority that is a planning authority for any purposes of the planning Acts within the means of the Town and Country Planning (Scotland) Act 1997;

a body (other than a company) that is established by or under an enactment for the purpose of carrying out functions conferred on it by or under an enactment;

any company in which all the shares are owned by any of the above; and

any wholly owned subsidiary of such a company.





http://www.legislation.gov.uk/ukpga/1978/29/section/10A





In this context, a ‘company’ is a company as defined by section 1 of the Companies Act 2006. Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website.






LBTT3041 Visiting forces and international military headquarters reliefs This relief is provided by the provisions of schedule 16A to the LBTT(S)A 2013 which is inserted by regulation 2(2)(b) of The Land and Buildings Transaction Tax (Addition and Modification of Reliefs) (Scotland) Order 2015 (Note: This is currently draft legislation). Description of relief – In certain situations, full relief can be claimed for land transactions involving visiting forces or international military headquarters. 'Visiting force' in this context means any body, contingent or detachment of a country’s forces which is for the time being or is to be present in Scotland on the invitation of Her Majesty’s Government in the United Kingdom. Relief conditions – A land transaction entered into with a view to any of the following is exempt from charge:

building or enlarging barracks or camps for a visiting force;

facilitating the training in Scotland of a visiting force; or

promoting the health or efficiency of a visiting force.

The above conditions also apply to any designated international military

headquarters as if:

it were a visiting force of a designated country;

the members of that force were the persons serving at or attached to the headquarters who are members of the armed forces of a designated country; and

references to the country to which a force belongs included any designated headquarters and the country of whose armed forces those persons are members.

In order for relief to apply, the designated country or headquarters concerned must

be designated for this purpose by Order in Council made for the purposes of section

74A of the Finance Act 1960.




http://www.legislation.gov.uk/ukpga/Eliz2/8-9/44/section/74

http://www.legislation.gov.uk/ukpga/Eliz2/8-9/44/section/74




LBTT3042 Relief for property accepted in satisfaction of tax This relief is provided by the provisions of schedule 16B to the LBTT(S)A 2013 which is inserted by regulation 2(2)(b) of The Land and Buildings Transaction Tax (Addition and Modification of Reliefs) (Scotland) Order 2015 (Note: This is currently draft legislation). Description of relief - Full relief from LBTT can be claimed in relation to certain land transactions involving property which has been accepted in satisfaction of tax and where the transaction is entered into under section 9(4) of the National Heritage Act 1980 by any of the following persons mentioned in section 9(2) of that Act, including:

any museum, art gallery, library or other similar institution having as its purpose or one of its purposes the preservation for the public benefit of a collection of historic, artistic or scientific interest;

anybody having as its purpose or one of its purposes the provision, improvement or preservation of amenities enjoyed or to be enjoyed by the public or the acquisition of land to be used by the public; and

anybody having nature conservation as its purpose or one of its purposes.









LBTT3043 Lighthouses relief This relief is provided by the provisions of schedule 16C to the LBTT(S)A 2013 which is inserted by regulation 2(2)(b) of The Land and Buildings Transaction Tax (Addition and Modification of Reliefs) (Scotland) Order 2015 (Note: This is currently draft legislation). Description of relief – Lighthouses play an integral part to the safe passage of ships around the coastline of Scotland. Full relief from LBTT can be claimed in relation to certain land transactions involving lighthouses (see further below). Relief conditions – A land transaction entered into by or under either of the following conditions is exempt from charge:

a land transaction entered into by or under the direction of the Secretary of State for the purposes of carrying into effect Part 8 (lighthouses) of the Merchant Shipping Act 1995; or

a land transaction entered into by or under the direction of the Commissioners of Northern Lighthouses for the purposes of carrying on the services referred to in section 221(1) of the Merchant Shipping Act 1995.




http://www.legislation.gov.uk/ukpga/1995/21/part/VIII

http://www.legislation.gov.uk/ukpga/1995/21/part/VIII





LBTT3044 Sub-sale development relief This relief is provided by the provisions of schedule 10A to the LBTT(S)A 2013 which is inserted by the Land and Buildings Transaction Tax (Sub-sale Development Relief and Multiple Dwellings Relief) (Scotland) Order 2015 (Note: This is currently draft legislation). Description of relief – The sub-sale development relief is available to the buyer (the ‘first buyer’) in a land transaction involving sub-sale arrangements where significant

development is in prospect. The first buyer claims the relief at the point when he or she submits a LBTT return in relation to the land transaction. The relief is restricted to the first buyer only; it is not available to a second or subsequent buyer where there is a chain of sub-sale arrangements in place. Relief conditions - The sub-sale development relief is available to the first buyer in a contract (the ‘first contract’ – this does not include a contract that is a sub-sale or an assignation of rights in relation to another contract) where the buyer acquires a chargeable interest under which the acquisition is to be completed by a conveyance if:

there is a qualifying sub-sale; and

the qualifying conditions are met.

The relief cannot be claimed if relief is also claimed in relation to alternative property finance (see LBTT3017). A sub-sale is a ‘qualifying sub-sale’ if it is a sub-sale under which:

the first buyer contracts to sell the whole or part of the subject-matter of the

first contract to another person (the ‘second buyer’);

the second buyer becomes entitled to call for a conveyance to that person of

the whole or part of the subject-matter of the first contract; and

immediately before the first buyer entered into the sub-sale, the first buyer

was entitled under the first contract to call for a conveyance of the whole or

part of that subject-matter.

The ‘qualifying conditions’ are that:

the substantial performance or completion of the first contract takes place at

the same time as, and in connection with, the substantial performance or

completion of the qualifying sub-sale.

In relation to this qualifying condition, an assignation, sub-sale or other transaction (relating to the whole or part of the subject-matter of the qualifying




sub-sale), as a result of which a person other than the second buyer becomes entitled to call for a conveyance to that person, is not to be treated as substantial performance of the qualifying sub-sale; and

significant development for commercial purposes of the subject-matter of the

qualifying sub-sale will be completed within five years from the date on which

the first buyer entered into the qualifying sub-sale.

References in this section of guidance to:

the ‘subject-matter’ of a qualifying sub-sale are to the chargeable interest, the

conveyance of which the second buyer is entitled to call for as a result of the

qualifying sub-sale.

Note: references to ‘part of the subject-matter’ of the first contract are to a chargeable interest that is the same as the chargeable interest the first buyer acquires under the first contract, except that it relates to part only of the land concerned.

‘development’ include the building of educational, sports and leisure, residential, retail, office or industrial buildings, but not agricultural buildings,

mining or engineering works (other than wind farms) or plant and machinery.

It also includes the redevelopment of such buildings, where the redevelopment works carried out are comparable in scale or cost to the construction of such buildings.

In relation to this meaning:

o ‘agricultural’ is something that is used for the purposes of the trade of

agriculture. This includes horticulture, fruit growing, seed growing, dairy farming, livestock breeding and keeping, the use of land as grazing land, meadow land, osier land, market gardens and nursery

grounds and the use of land for woodlands where that use is ancillary to the farming of land for other agricultural purposes;

o ‘building’ has the meaning given in section 55 of the Building (Scotland)

Act 2003; and

o ‘industrial building’ includes a building built to be used for the purposes of a trade carried on in a factory, mill or laboratory, for the purposes of a dock undertaking, for the purposes of the trade of hotel-keeping, or

for the purposes of a trade which consists of the operation or management of an airport used solely or mainly by aircraft carrying passengers or cargo for hire or reward.




‘significant development’ is development that is significant having regard to,

among other things, the nature and extent of the subject matter and also its

market value.

The relief is not intended to be available, for example, where an existing building on a site is to be subject to a refurbishment, or where only minor

‘development’ takes place, relative to the nature, extent and market value of the land that is the subject of the sub-sale arrangement.

Circumstances under which full or partial relief are available Full relief is available to a land transaction (‘the first land transaction’) where the subject-matter of the qualifying sub-sale is the whole subject-matter of the first contract and the land transaction is one that is either:

effected on completion of the first contract because the transaction is

completed without having been substantially performed – see LBTT1005; or

treated as effected on that contract being substantially performed because the

contract has been substantially performed without completion – see

LBTT1005.

Partial relief is available where the subject-matter of the qualifying sub-sale is part of the subject-matter of the first contract. Where this is the case, the chargeable consideration for the first land transaction (see above) = A-B. Where:

A - is the amount that would otherwise be the chargeable consideration for that transaction were there no sub-sales development relief; and

B – is the amount of that consideration attributable (on a just and reasonable basis) to the part of the subject-matter of that transaction which is also the subject-matter of the qualifying sub-sale.

Calculating the chargeable consideration for the qualifying sub-sale The chargeable consideration for the qualifying sub-sale = C+D Where:

C – is so much of the consideration under the first land transaction as is

referable to the subject-matter of the qualifying sub-sale and is to be given


(directly or indirectly) by the second buyer or a person connected with the

second buyer; and

D – is the consideration given for the qualifying sub-sale.

This is because the sub-sale transactions can mean that the second buyer pays the first buyer a premium for the sub-sale transactions and may have to pay the first seller some or all of the purchase price under the first contract. Claiming the relief - To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website. When the first buyer claims the relief by submitting a LBTT return, we may ask for specific evidence in support of the claim i.e. that significant development will take place. Examples of what evidence we might ask to see are:

development/architectural plans;

details of funding arrangements;

building contracts; and

planning permission applications.

Withdrawal of relief Full withdrawal of relief occurs if no significant development takes place within five

years from the date on which the first buyer entered into the qualifying sub-sale. Where full withdrawal of relief occurs, the amount of tax chargeable in relation to the first land transaction is the amount that would have been chargeable if the relief had not been claimed. Partial withdrawal of relief occurs if:

the significant development proposed does not take place within five years

from the date on which the first buyer entered into the qualifying sub-sale; but

some development of the subject-matter of the qualifying sub-sale has taken

place within that period.

Where partial withdrawal of relief occurs, the amount of tax chargeable in relation to

the first land transaction is a just and reasonable proportion (taking into account the




extent to which any significant development originally proposed has taken place) of the amount that would have been chargeable if the relief had not been claimed. Where relief is withdrawn or partially withdrawn, the first buyer in the sub-sale

arrangement must make a further LBTT return to us within 30 days of the end of the five year period, and pay any tax that is then due.


LBTT4001 Payment of tax and making a LBTT return This guidance chapter will help in determining when a LBTT return is required and when tax is payable. Separate guidance is available for:

land transactions involving leases – see LBTT6001;

'How to sign up to the LBTT Online Portal';

'How to make a LBTT return and pay tax' (note: there are two versions of this guidance – one for returns made online and one for returns made by paper); and

'How to amend a LBTT return'.

This chapter is structured as follows:

Making a LBTT return – LBTT4002

Notifiable transactions – LBTT4003

Duty to make a LBTT return – LBTT4004

Liability for payment of tax – LBTT4005

Amending a LBTT return – LBTT4006

LBTT return to be made and tax paid before application for registration – LBTT4007

‘Arrangements satisfactory’ to Revenue Scotland for the payment of tax – LBTT4008

Residential land or property LBTT rates and bands – LBTT4009

Meaning of residential property – LBTT4010

Non-residential or ‘mixed’ land or property LBTT - rates and bands – LBTT4011

Meaning of non-residential property and treatment of ‘mixed’ property – LBTT4012


Calculating the amount of tax chargeable: linked transactions – LBTT4014

LBTT return or further return in consequence of a later linked transaction – LBTT4015





Application to defer payment in case of contingent or uncertain consideration – LBTT4016

Availability of deferral of payment of tax and making the application – LBTT4017

Content of the application to defer payment of tax – LBTT4018

Acceptance of an application for deferral of payment – LBTT4019

Refusal of an application for deferral of payment – LBTT4020

LBTT return where contingency ceases or consideration ascertained – LBTT4021

Further LBTT return where a relief is withdrawn – LBTT4022


LBTT4002 Rules regarding notifiable land transactions and payment of tax

Guidance on determining when a land transaction is notifiable, the duty to make a LBTT return and pay any tax due, the ability to amend a LBTT return and the links with registration are available as follows:

Notifiable transactions – LBTT4003

Duty to make a LBTT return – LBTT4004

Liability for payment of tax – LBTT4005

Amending a LBTT return – LBTT4006

LBTT return to be made and tax paid before application for registration – LBTT4007

Arrangements satisfactory to Revenue Scotland for payment of tax – LBTT4008


LBTT4003 Notifiable transactions All land transactions need to be notified to us by means of a LBTT return unless (in relation to transactions other than those involving leases):

the interest in question is an exempt interest, namely a security interest such as the creditor’s interest in a standard security, in which case the transaction is beyond the scope of the legislation;

the transaction is classed as an exempt transaction (see LBTT3002);

the chargeable consideration for the transaction involving the acquisition of ownership and all linked transactions is less than £40,000; or

it is an acquisition of a chargeable interest other than a major interest in land where the chargeable consideration does not exceed the nil rate tax band applicable to the transaction.

None of the above apply where the transaction is under a contract providing for conveyance to a third party (see LBTT1006). Separate rules apply relating to transactions involving leases which are notifiable. See LBTT6010 for more information. LBTT(S)A 2013 section 30 Where a tax relief (see LBTT3010) is claimed to reduce or even eliminate the tax chargeable, a LBTT return must still be made if the consideration includes any amount on which LBTT would be chargeable but for the relief.



LBTT4004 Duty to make a LBTT return Although in almost every land transaction the buyer’s agent is likely to make the LBTT return and pay any tax on behalf of the buyer, the buyer remains legally responsible for fulfilling both of these actions accurately and on time, where they are required to do so. The buyer must make a LBTT return (and calculate and pay any tax due at the same time – see LBTT4005) to us for a notifiable transaction (see LBTT4003) within 30 days of the effective date (see LBTT1004) of the transaction (see LBTT1002). The date the return is required to be made by is the filing date (see LBTT1000). Guidance on 'How to make a LBTT return and pay tax' is available separately on our website. Once the LBTT return has been made, subject to certain restrictions it can be amended up to 12 months after the filing date - see LBTT4006. Depending on the circumstances a further LBTT return may also be required at some point – see:

LBTT4015 (further return in consequence of a later linked transaction);

LBTT4021 (further return where contingency ceases or consideration is ascertained); and

LBTT4022 (further return where relief is withdrawn). LBTT(S)A 2013 section 29 A buyer who fails to make a LBTT return to us by the filing date is liable to a penalty (see RSTP3005). If the return contains an inaccuracy, the buyer may be liable to a penalty (see RSTP3011). A buyer required to make a LBTT return to us is also required to keep and preserve certain records. A buyer in a land transaction which is not notifiable is also required in some instances to keep and preserve certain records, mostly to evidence that the transaction was not notifiable. See the guidance on keeping and preserving records (LBTT9001) for more information.






LBTT4005 Liability for payment of tax The buyer is responsible for paying any tax due at the same time as the LBTT return for the notifiable transaction is made to us (see LBTT4004). For this purpose, tax is treated as paid if arrangements satisfactory to us are made for the payment of the tax (see LBTT4008). Different rates and bands apply when determining the amount of tax payable – see LBTT4009 for residential property transactions and LBTT4011 for non-residential or ‘mixed’ property transactions. Guidance on 'How to make a LBTT return and pay tax' is available separately on our website. An application may be made to us to defer payment of tax where the amount of consideration is contingent or uncertain (see LBTT4016). A buyer who fails to pay tax prior to the expiry of 30 days after the date payment is due is liable to a penalty (see RSTP3008). Interest will be charged however on the amount of any unpaid tax from the filing date until the date it is paid (see RSTP4002). LBTT(S)A 2013 sections 40 and 41 If two or more buyers are acting jointly, they are jointly and severally liable for the tax although it can be fully discharged by any one of them. A single LBTT return has to be made and all buyers should be included. LBTT(S)A 2013 section 28 LBTT(S)A 2013 section 48 When a partnership acquires a chargeable interest, all partners at the effective date and any person who becomes a partner after the effective date are responsible partners in relation to the transaction. A representative partner(s) may be appointed to deal with LBTT returns. A list of all partners must be included in the LBTT return. However, it is only the appointed representative who needs to authorise submission of the return (see part 3 of schedule 17 to the LBTT(S)A 2013). Where trustees of a settlement are liable to make a payment of tax or any associated payment including interest or penalties, such payment may be made by any one or more of the responsible trustees. Responsible trustees are those who are trustees at the effective date of the transaction and anyone who becomes a trustee subsequently. Any one or more of the responsible trustees can make a LBTT return and such persons are called ‘the relevant trustee’ (see paragraph 16 of schedule 18 to the LBTT(S)A 2013).




http://www.legislation.gov.uk/asp/2013/11/part/4/chapter/2




http://www.legislation.gov.uk/asp/2013/11/schedule/17/part/3




LBTT4006 Amending a LBTT return Information on a LBTT return may need to be corrected or updated after it has been sent to us (which may result in more or less tax being payable). Under section 83 of the RSTPA 2014 a LBTT return can be amended up to 12 months after the filing date (see LBTT1000), but no amendments can be made that change either the identity of any buyer or the property details, such as the title number. Guidance on 'How to amend a LBTT return' is available separately on our website. If the amended LBTT return contains an inaccuracy, the buyer may be liable to a penalty (see RSTP3011).





LBTT4007 LBTT return to be made and tax paid before application for registration In terms of section 43 of the LBTT(S)A 2013, the Keeper of the Registers of Scotland (RoS) may not accept an application for registration, in any of her registers, of a document effecting or evidencing a notifiable transaction unless a LBTT return has been made to us and any tax due has been paid. For this purpose, tax is treated as paid if arrangements satisfactory to us are made for payment of the tax (see LBTT4008). In a standard house purchase this means that the disposition cannot be registered unless the LBTT position is in order. This is similar to the position applicable to stamp duty on dispositions pre-2003. Leases over seven years (but not for more than 20 years) are generally notifiable but are not registrable in the Land Register. They may be registered in the Books of Council and Session and indeed, such registrations are customary (especially with short-term commercial leases). The following questions relating to LBTT have been added by RoS to the relevant registration application forms: ‘Is the transaction to which this application relates a notifiable transaction in terms of section 30 of the Land and Buildings Transaction Tax (Scotland) Act 2013? Yes or No If yes, has a land transaction return been made, and have arrangements satisfactory to the tax authority been made for the payment of any tax payable in respect of the transaction? Yes or No’ The second question relating to a LBTT return and arrangements satisfactory should only be answered ‘Yes’ where either a) a paper return is being submitted to Registers of Scotland along with the registration application or b) an acknowledgement of successful submission from us has already been obtained prior to the submission of the registration application to Registers of Scotland. Although, in keeping with the Scottish Government's ‘Digital First’ agenda, we encourage the making of LBTT returns electronically, the facility to make a paper LBTT return provides flexibility for taxpayers and their agents and also allows for an alternative option for those not yet in a position to make returns electronically. LBTT(S)A 2013 section 43 The Land and Buildings Transaction Tax (Ancillary Provisions) (Scotland) Order 2014






LBTT4008 Arrangements satisfactory to Revenue Scotland for payment of tax Any tax due is treated as paid if arrangements satisfactory to us are made for payment of tax at the same time as the LBTT return is made to us. For LBTT returns made to us online, we accept payment by Direct Debit, BACS/CHAPS, cheque, credit card, debit card. For LBTT returns completed and submitted by paper, we only accept payment by cheque. We do not accept payment over the telephone or by cash for any method of submission. The payment must be for the LBTT liability only. Other amounts, for example fees payable to RoS, should not be included. Any such amounts that are due need to be paid separately to the LBTT liability. For further details on the conditions applying to each payment method, separate guidance on 'How to make a LBTT return and pay tax' is available on our website. Failed / amended transaction where return already submitted If a payment is unsuccessful, for whatever reason, in relation to an amount of tax due following a LBTT return, then the buyer will be in default and debt recovery procedures may be appropriate. In such cases, the buyer will be in default from the day after the date of submission of the LBTT return, not from any later date that had been proposed under arrangements satisfactory. Generally, arrangements satisfactory will apply on the same basis for everyone submitting a LBTT return. But where a payment method fails from a business, firm or person, and particularly where it fails repeatedly, that payment method may – at our discretion – be denied to that business, firm or person for future transactions. In extreme cases, where there are repeated failures to honour commitments made under arrangements satisfactory by different payment methods, we may consider withdrawing arrangements satisfactory entirely for that buyer or agent. This would mean that payment would always have to be made by the buyer or agent on the same day as the LBTT return is made. We will only take such action after warnings had already been given and, given our responsibility for protection of the revenue, where we felt that we have little alternative option. LBTT(S)A 2013 section 40 LBTT(S)A 2013 section 43(4)





LBTT4009 Residential property transactions - LBTT rates and bands For residential property transactions (see LBTT4010 for what constitutes residential property), the rate of tax is determined by reference to percentages of the chargeable consideration (see LBTT2001) for the transaction falling within the bands below. LBTT(S)A 2013 section 24 The Land and Buildings Transaction Tax (Tax Rates and Tax Bands) (Scotland) Order 2015 (Note: This is currently draft legislation)

Purchase price LBTT rate

Up to £145,000 0%

Above £145,000 to £250,000 2%

Above £250,000 to £325,000 5%

Above £325,000 to £750,000 10%

Over £750,000 12%

If the purchase price is above the nil rate tax band, LBTT is charged at the appropriate rate on the amount of the chargeable consideration within the relevant bands. For example, a house bought for £330,000 is charged at: 0% for the first £145,000; then 2% for the next £105,000; then 5% for the next £75,000; then 10% for the remaining £5,000. So £6,350 must be paid in LBTT. LBTT(S)A 2013 section 25 Anything of economic value which is given in exchange for land or property counts as the chargeable consideration (see LBTT2002). LBTT(S)A 2013 schedule 2 We have developed an online tax calculator on our website for help in working out the amount of LBTT payable on residential transactions. This calculator is for reference purposes only.





http://www.legislation.gov.uk/asp/2013/11/schedule/2

https://www.revenue.scot/land-buildings-transaction-tax/tax-calculator/lbtt-property-transactions-calculator


LBTT4010 Meaning of residential property In most cases there will be no difficulty in establishing whether or not a property is residential property. Any property which is not residential property is treated as non-residential property for LBTT purposes. See LBTT4012 for further guidance on non-residential or ‘mixed’ property. Residential property is:

a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for use as a dwelling;

land that forms part of a garden or grounds of a building suitable for use as a dwelling. This includes any buildings or structures on such land; or

an interest in or right over land that subsists for the benefit of any of the above.

The use of the property at the effective date of the transaction overrides any past or intended future uses for this purpose. If the transaction involves six or more residential properties, then this is treated as non-residential property for LBTT purposes. Buildings used for the following purposes are residential property:

residential accommodation for school pupils;

residential accommodation for students – but not a hall of residence for students in further or higher education (see below);

residential accommodation for members of the armed forces; or

an institution that is the sole or main residence of at least 90% of its residents and is not one of the buildings listed as non-residential property in LBTT4012.




LBTT4011 Non-residential or ‘mixed’ land and property - rates and bands For non-residential property transactions (see LBTT4012 for what constitutes non-residential property), the rate of tax is determined by reference to percentages of the chargeable consideration (see LBTT2001) for the transaction falling within the bands below. LBTT(S)A 2013 section 24 The Land and Buildings Transaction Tax (Tax Rates and Tax Bands) (Scotland) Order 2015 (Note: This is currently draft legislation)

Purchase price Proposed LBTT rate

Up to £150,000 0%

Above £150,000 to £350,000 3%

Above £350,000 4.5%

If the purchase price is above the nil rate tax band, LBTT is charged at the appropriate rate on the amount of the chargeable consideration within the relevant bands. For example, an office bought for £465,000 is charged at: 0% for the first £150,000; then 3% for the next £200,000; then 4.5% for the remaining £115,000. So £11,175 must be paid in LBTT. LBTT(S)A 2013 section 25 Anything of economic value which is given in exchange for land or property counts towards the chargeable consideration. If the seller has opted to tax, so that VAT is chargeable on the price, LBTT is payable on the price including VAT. LBTT(S)A 2013 schedule 2

We have developed an online tax calculator on our website for help in working out the amount of LBTT payable on non-residential transactions. This calculator is for reference purposes only.






https://www.revenue.scot/land-buildings-transaction-tax/tax-calculator/lbtt-property-transactions-calculator


LBTT4012 Meaning of non-residential property and treatment of ‘mixed’ property Non-residential property means any property that is not residential property. Undeveloped land is essentially non-residential but may be residential property if, at the effective date, a residential building is being built on it. In addition, where six or more separate homes are the subject of a single transaction or a grant of a lease over them, then those homes are treated as non-residential property (subject to multiple dwellings relief – see LBTT3015). Property in a land transaction is non-residential if:

the main subject-matter of the transaction consists of or includes an interest in land that is non-residential property; or

the transaction is one of a number of linked transactions and the main subject-matter of any of these transactions consists of or includes such an interest.

Buildings used for the following purposes are non-residential property:

a home or other institution providing residential accommodation for children;

a hall of residence for students in further or higher education;

a home or other institution for persons in need of personal care due to old age, disability, past or present dependence on alcohol or drugs or past or present mental disorder;

a hospital or hospice;

a prison or similar establishment; or

a hotel or inn or similar establishment.

Where a building is used for one of these purposes, no account is to be taken of the suitability of its use for any other purpose. ‘Mixed’ property transactions A transaction where there is a mixture of residential and commercial interests (for example, a landed estate or a shop with a flat above it) is treated as a non-residential transaction and will therefore be subject to the non-residential LBTT rates and bands (see LBTT4011). All land transactions will be treated on their own merits, including those involving property such as bed and breakfast establishments or guest houses. However, a bed and breakfast (B&B) establishment which has bathing facilities, telephone lines


etc. installed in each room and is available all year round would normally be considered non-residential. Where a building that is not in use could be used for at least one of the purposes listed for residential property in LBTT4010 and at least one of the purposes listed above for non-residential property, then if there is one use to which it is most suitable or if all the uses are on one of the lists of uses, then no account is to be taken of its suitability for any other use. If this is not the case, then the building is to be treated as suitable for use as a dwelling, and accordingly treated as residential property. LBTT(S)A 2013 section 24 LBTT(S)A 2013 section 59




LBTT4013 Linked transactions Linked transactions are covered in more detail in LBTT2008. Guidance on determining the amount of tax that is chargeable for linked transactions, and the circumstances under which a LBTT return, or further LBTT return, may be required in consequence of a later linked transaction is available as follows:

Calculating the amount of tax chargeable: linked transactions – LBTT4014

LBTT return or further LBTT return in consequence of a later linked transaction – LBTT4015


LBTT4014 Calculating the amount of tax chargeable: linked transactions Linked transactions are explained in more detail in LBTT2008. Where a chargeable transaction is one of a number of linked transactions, the amount of tax for all of the linked transactions is first calculated using the appropriate rates and bands as if the linked transactions were a single transaction. The tax payable for an individual transaction is then reached by multiplying the total tax payable on all the linked transactions by the fraction individual consideration/total consideration. The mechanism for calculating the tax is:

Step 1 - Add the consideration for each transaction to give the total consideration;

Step 2 - Multiply so much of the total consideration that falls within each band by the appropriate tax rate and add those up to give the total tax chargeable;

Step 3 - Divide the consideration for the individual transaction by the total consideration to arrive at a fraction; and

Step 4 - Multiply the total tax chargeable by the fraction reached in step 3.

The result is the amount of tax chargeable on the individual transaction.

A worked example on linked transactions is provided separately on our website under ‘LBTT Worked Examples’. LBTT(S)A 2013 section 26




LBTT4015 LBTT return or further LBTT return in consequence of a later linked transaction A LBTT return, or further LBTT return, must be made by the buyer to us where there is a later transaction that is linked to an earlier one, and as a result:

the earlier transaction becomes notifiable;

more tax is payable on the earlier transaction; or

tax becomes payable on the earlier transaction when none was payable before.

The LBTT return, or further LBTT return, must be made within 30 days of the effective date of the later transaction. The date the return is required to be made by is the filing date (see LBTT1000). The LBTT return must include an assessment of the amount of tax due, together with payment of any tax due, based on the tax rates and bands that applied at the effective date of the earlier transaction. Guidance on 'How to make a LBTT return and pay tax' is available separately on our website. Once the LBTT return has been made, subject to certain restrictions it can be amended up to 12 months after the filing date - see LBTT4006. There may also be a requirement to submit a LBTT return in respect of the later transaction. LBTT(S)A 2013 section 34 LBTT(S)A 2013 section 40 A buyer who fails to make a LBTT return to us by the filing date is liable to a penalty (see RSTP3005). If the return contains an inaccuracy, the buyer may be liable to a penalty (see RSTP3011). A buyer who fails to pay tax prior to the expiry of 30 days after the date payment is due (the day the LBTT return is made) is liable to a penalty (see RSTP3008). Interest will be charged however on the amount of any unpaid tax from the filing date until the date it is paid (see RSTP4002). A buyer required to make a LBTT return to us is also required to keep and preserve certain records in relation to making a correct and complete return. See the guidance on keeping and preserving records (LBTT9001) for more information.









LBTT4016 Application to defer payment in case of contingent or uncertain consideration A buyer can make an application to us to defer the LBTT payable on a land transaction where:

the whole or part of the chargeable consideration is contingent or uncertain; and

the chargeable consideration becomes payable more than six months after the effective date of the transaction.

This could include the situation where additional consideration is payable by the buyer if planning permission is obtained after the sale. An application under this section does not affect the buyer's obligation to pay LBTT on any consideration that:

has already been paid when the application is made; or

is not contingent or uncertain and the amount of which is known at the time the application is made.

Delayed consideration is still consideration and there is no discount allowed for postponement. Deferral can apply to consideration which is payable before six months if there is any part of the uncertain or contingent consideration payable after six months. Deferral is not available for consideration that is uncertain because the amount is ascertainable but has not yet been ascertained. Where consideration is ascertainable but not yet ascertained, the LBTT return should be completed on the basis of a best estimate of the purchase price which will be payable. Within 30 days from when the final consideration is determined the buyer should submit an amended LBTT return (see LBTT4006). Guidance on 'How to amend a LBTT return' is available separately on our website. A worked example on applications to defer payment of tax is provided separately on our website under ‘LBTT Worked Examples’. Further guidance on applications for deferral of payment is available as follows:

Availability of deferral of payment of tax and making the application - LBTT4017

Content of the application to defer payment of tax where there is contingent or uncertain consideration - LBTT4018





When an application for deferral is accepted by Revenue Scotland - LBTT4019

Refusal by Revenue Scotland of the application for deferral - LBTT4020 LBTT(S)A 2013 section 31 LBTT(S)A 2013 section 41




LBTT4017 Availability of deferral of payment of tax and making the application An application to defer the LBTT payable on a transaction may be made by the buyer where the whole or part of the chargeable consideration:

is contingent or uncertain; and

becomes payable or may become payable more than 6 months after the effective date of the transaction.


The application to defer payment of tax must be made in writing to us at the contact address on our website (clearly marking the letter ‘Application to defer payment of LBTT’ and providing a contact telephone number) on or before the due filing date for the LBTT return (see LBTT1000). It will not be accepted if it is made on a later date. If we approve your deferral application we will give you a reference number to use in your LBTT return. We recommend you make your application to us at least 10 working days before you intend to make your return. Regulation 4 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014 Where an application is made, the tax in relation to that transaction remains due as if there had been no application (and if relevant no appeal) but payment of tax is postponed until we reach a decision on the application. If we then refuse the application to defer the payment of tax, the tax due is determined as if were charged by a Revenue Scotland assessment and as if notice of the assessment was made on the date of refusal to defer payment of tax. Regulation 7 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014 An application to defer payment of tax does not affect the buyer's obligation to pay LBTT on any chargeable consideration that:

has already been paid when the application is made; or

is not contingent and is known at the time the application is made.

Where the buyer makes such a payment of tax, rules apply requiring a return when a contingency ceases, consideration is ascertained and where less tax is payable in those circumstances. Deferral can apply to consideration which is payable before six months if there is any part of the uncertain or contingent consideration payable after six months. Regulation 12 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014


https://www.revenue.scot/help/contact-us-0

https://www.revenue.scot/help/contact-us-0








LBTT(S)A 2013 sections 31 and 32 Deferral of payment of tax is not available to consideration that consists of rent. LBTT(S)A 2013 section 41




LBTT4018 Content of the application to defer payment of tax The application must set out:

the identity of the buyer;

the location of the land involved;

the nature of the contingency/uncertain payment;

the amount of consideration for which deferment is sought;

as much detail of the times of expected payments as it is possible to give;

a reasoned opinion as to when this part of the consideration will cease to be contingent or can be ascertained;

a calculation of the LBTT payable on the total of the actual and the contingent/uncertain consideration; and

a calculation of the amount of LBTT in respect of which the application to defer payment refers.

Where the contingent or uncertain consideration relates to, or any element of that consideration consists of:

construction works, works to improve or repair a building or other works to enhance the value of the property; or

the provision of services,

then the application must include a proposal to us for the payment of tax within 30 days of the substantial completion of the works or services. If the works or services are expected to take longer than 6 months, then the application must set out a payment schedule for tax at intervals of not more than 6 months. Regulation 5 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014




LBTT4019 Acceptance of an application for deferral of payment We may ask for further information in order to determine if an application for deferral (where contingent or uncertain consideration applies) should be approved. If we accept the application for deferral of payment, the notice of approval we give must set out the terms of approval and specify the amount of tax payable in connection with the initial LBTT return, the nature and dates of relevant events and make clear that tax is payable within 30 days of those dates. We will also give you a deferral reference number which you will need in order to be able to claim the deferral in your LBTT return. ‘Relevant date’ in this context means an event on the occurrence of which the whole or any part of the consideration to which an application relates will either cease to be contingent or become certain. Regulation 8 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014 If the application relates to tax that has already been paid, we will repay the amount paid to the taxpayer, along with any interest that accrued since the date of payment. See RSTP4004 for further guidance on interest. Where we accept the application, the buyer must make a LBTT return or further LBTT return:

within 30 days of the consideration ceasing to be contingent or becoming certain;

if relevant, within 30 days of the substantial completion of works or services which make up some or all of the contingent or uncertain consideration;

in accordance with a scheme for payment of tax for works under which services are expected to last for more than 6 months; or

after the final payment has been made for such a scheme for payment of tax, within 30 days of the buyer obtaining new information which changes the amount of tax payable in relation to tax that has already been paid.

The LBTT return and payment of tax must be made at the same time. Guidance on 'How to make a LBTT return and pay tax' is available separately on our website. In the event that less tax is payable than has already been paid, the buyer may submit a claim for overpayment of tax by:

amending the LBTT return, if within the period allowed for the amendment of a return (see LBTT4006); or






if outwith this period, making a claim under section 107 of the RSTPA 2014 no later than five years after the date the original return was required to be made (see RSTP7003).

Any tax repaid will be repaid together with any interest accrued since the date of payment (see RSTP4004). Regulation 11 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014 Where there is a scheme of payment in place in accordance with the third bullet point above, the buyer and us may agree to vary the scheme of payment so that the next LBTT return or further return due to be made in relation to the consideration (or element of the consideration) consisting of works or services may be made within 30 days after the substantial completion of the works or services. If the works or services are not then substantially completed within six months of the date on which the LBTT return or further return would have been required (but for the effect of the variation) then the variation ceases to have effect and a return or further return will be required in accordance with the third bullet point above. Regulation 14 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014 An application that we have accepted shall have no effect if it contains false information or if any significant facts or circumstances relevant to it are not disclosed to us. An application will also cease to have effect if the facts and circumstances relevant to it change. Regulation 13 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014











LBTT4020 Refusal of an application for deferral of payment We may refuse an application for deferral of payment if the following conditions are met:

the whole or some part of the chargeable consideration is not contingent or uncertain or it is not payable more than 6 months after the effective date of the transaction;

the application is not submitted in the correct form required, or does not contain the required information;

the transaction involves artificial tax avoidance arrangements as defined in Part 5 of the RSTPA 2014 – see RSTP8001);

the application or the information in it is incorrect; or

information is not provided within the required timescale. Regulation 9 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014 If we refuse the application we must notify the buyer, setting out the grounds for the refusal and the amount of tax due in consequence of our refusal. Regulation 8 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014 If the buyer chooses not to appeal the decision to refuse the application, the tax becomes due and payable on the date we give our refusal notice, as if that were an assessment of tax made by us. Regulation 7 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014

http://www.legislation.gov.uk/asp/2014/16/part/5









LBTT4021 LBTT return where contingency ceases or consideration ascertained To adjust the amount of LBTT payable when a contingent, uncertain or unascertained consideration becomes known, the buyer must make a further LBTT return to us. This must be made within 30 days of the contingency ceasing or the consideration being ascertained. The date the return is required to be made by is the filing date (see LBTT1000). The LBTT return must contain a self-assessment of the tax payable, calculated in accordance with the rates in force at the original effective date of the transaction, together with payment of any tax due. Guidance on 'How to make a LBTT return and pay tax' is available separately on our website. A buyer who fails to make a return to us by the filing date is liable to a penalty (see RSTP3005). If the return contains an inaccuracy, the buyer may be liable to a penalty (see RSTP3011). A buyer who fails to pay tax prior to the expiry of 30 days after the date payment is due (the day the LBTT return is made) is liable to a penalty (see RSTP3008). Interest will be charged however on the amount of any unpaid tax from the filing date until the date it is paid (see RSTP4002). A claim can be made for repayment of tax if less tax is payable for the transaction as a result of the contingent, uncertain or unascertained consideration becoming known. If the claim is made within the 12 month period allowed for the amendment of a LBTT return, the claim must be made by amending the LBTT return (see LBTT4006). If the claim is made after the end of the 12 month amendment period, the claim must be made under section 107 of the RSTPA 2014 and no later than five years after the date the original return was required to be made (see section 115 of the RSTPA 2014). Further guidance on how to make such a claim can be found in RSTP7003. Interest will be paid on repayment of overpaid tax from the date of original payment by the buyer. Interest will be charged however from the day after the payment was due (see RSTP4004). LBTT(S)A 2013 sections 31 and 32 LBTT(S)A 2013 section 40 A buyer required to make a LBTT return to us is also required to keep and preserve certain records in relation to making a correct and complete return. See the guidance on keeping and preserving records (LBTT9001) for more information.














LBTT4022 Further LBTT return where a relief is withdrawn Where tax relief was claimed in respect of:

certain acquisitions of residential property – see LBTT3012, LBTT3013 and LBTT3014;

transfer of multiple dwellings – see LBTT3015;

alternative finance investment bonds – see LBTT3021;

group relief – see LBTT3025;

reconstruction and acquisition relief – see LBTT3029;

charities relief – see LBTT3035; or

sub-sales development relief – see LBTT3044, then the buyer may have to make a further LBTT return to us where relief is withdrawn and a particular event occurs. The events that may lead to a withdrawal of the relief are described in the guidance for each of the reliefs. Any further return must be made within 30 days of that event. The date the return is required to be made by is the filing date (see LBTT1000). The LBTT return must contain an assessment of the amount of tax now due, which is the amount of tax that would have been chargeable in relation to the transaction had the relief not been available. Any additional tax due must be made at the same time as the LBTT return is made. Guidance on 'How to make a LBTT return and pay tax' is available separately on our website. Once the LBTT return has been made, subject to certain restrictions it can be amended up to 12 months after the filing date - see LBTT4006. LBTT(S)A 2013 section 33 LBTT(S)A 2013 section 40 A buyer who fails to make a LBTT return to us by the filing date is liable to a penalty (see RSTP3005). If the LBTT return contains an inaccuracy, the buyer may be liable to a penalty (see RSTP3011). A buyer who fails to pay tax prior to the expiry of 30 days after the date payment is due (the day the LBTT return is made) is liable to a penalty (see RSTP3008). Interest will be charged however on any unpaid tax (see RSTP4002).









A buyer required to make a LBTT return to us is also required to keep and preserve certain records in relation to making a correct and complete LBTT return. See the guidance on keeping and preserving records (LBTT9001) for more information.


LBTT5001 Rules for particular transactions and bodies The LBTT(S)A 2013 includes rules for particular bodies or particular types of transactions. These include rules for:

Exchanges – LBTT5002

Companies and other organisations – LBTT5003

Company in liquidation – LBTT5004

Unit trust schemes – LBTT5005

Open ended investment companies – LBTT5006

Persons acting in a representative capacity – LBTT5007

Industrial and Provident Societies – LBTT5008 LBTT guidance on partnerships (see LBTT7001) and trusts (see LBTT8001) are provided separately.


LBTT5002 Exchanges Where land transactions are entered into that involve an exchange of major interests in land (traditionally known as ‘excambions’), they are treated as two separate land transactions which are not linked for LBTT purposes (see LBTT2008). The expression ‘major interest in land’ means the interest of an owner of land or the right of a tenant in or over property subject to a lease. Each land transaction requires a LBTT return to be made to us unless it is not notifiable (see LBTT4003). Two parties might enter into two or more land transactions in consideration for each other. A might accept a conveyance from B of an area of land or a building as all or part of the consideration for disposing to B an area of land or building. LBTT(S)A 2013 section 13 Determining the chargeable consideration for transactions involving exchanges of interests in land The chargeable consideration rules below regarding exchanges of interests in land:

do not apply where the rule involving arrangements with certain public or education bodies applies – see LBTT2015; and

are subject to the rule regarding the division or partition of a chargeable interest to which parties are jointly entitled - see LBTT2010.

Two worked examples in relation to determining the chargeable consideration in exchanges are provided separately on our website under ‘LBTT Worked Examples’. In the rules below:

‘relevant acquisition’ means a land transaction which is entered into by a person as a buyer (alone or jointly) wholly or partly in consideration of one or more other land transactions (a ‘relevant disposal’) being entered into by that person (alone or jointly) as seller; and

‘relevant transaction’ means any transaction which is either a relevant acquisition or a relevant disposal.

The rules that apply depend on whether the subject-matter of any of the relevant transactions is or is not a major interest in land. If the subject-matter of any of the relevant transactions is a major interest in land then:

where a single relevant acquisition is made, the chargeable consideration for the acquisition is the greater of:




o the market value (see LBTT2016) of the subject-matter of the acquisition (or, if the acquisition is the grant of a lease, the rent); or

o the amount which would, ignoring this rule, be the chargeable

consideration for the acquisition.

where two or more relevant acquisitions are made, the chargeable consideration for each relevant acquisition is the greater of: o the market value of the subject-matter of that acquisition (or, if the

acquisition is the grant of a lease, the rent); or

o the amount which would, ignoring this rule, be the chargeable consideration for that acquisition.

If the subject-matter of none of the relevant transactions is a major interest in land then:

where a single relevant acquisition is made in consideration of one or more relevant disposals, the chargeable consideration for the acquisition is the amount or value of any chargeable consideration other than the disposal or disposals that are given for the acquisition; or

where two or more relevant acquisitions are made in consideration of one or more relevant disposals, the chargeable consideration for each relevant acquisition is the appropriate proportion (see below) of the amount or value of any chargeable consideration other than the disposal or disposals that are given for the acquisitions. The ‘appropriate proportion’ is:

MV TMV

Where:

o MV is the market value (see LBTT2016) of the subject-matter of the acquisition for which the chargeable consideration is being determined; and

o TMV is the total market value of the subject-matter of all the relevant acquisitions.




LBTT5003 Companies and other organisations A company and other organisations An organisation is defined as any body corporate or unincorporated association. LBTT(S)A 2013 section 44 Who can act for a company and thus sign on behalf of it The proper officer of a company is the company secretary or person acting as company secretary. However, another person having for the time being express, implied or apparent authority may also act on behalf of the company. This will normally include any of the company’s directors. Who can act for an unincorporated association The proper officer of an unincorporated association is the treasurer or person acting as treasurer. LBTT(S)A 2013 section 44




LBTT5004 Company in liquidation When a company is in liquidation or administration, different rules apply. The liquidator or, as the case may be, the administrator becomes the proper officer and must sign the LBTT return or amended LBTT return. If two or more people have been appointed to act jointly or concurrently as administrator of an organisation, notice should be given to us stating which one of them will act solely as the proper officer. If notice is not given to us by the joint administrators, we may designate a proper officer. LBTT(S)A 2013 section 44



LBTT5005 Unit trust schemes Unit trust schemes are collective investment vehicles used to hold assets, including land, on behalf of unit holding investors. For LBTT purposes, unit trusts (including unauthorised unit trusts) are treated as companies and are therefore subject to LBTT when they first acquire a land asset, but not each time new unit holders acquire rights within the unit trust. A unit trust scheme is treated as if the scheme trustees were a company and the rights of the unit holders were shares in the company. Each part of an umbrella scheme is regarded as a separate unit trust scheme. An umbrella scheme means a unit trust scheme that provides arrangements for separate pooling of participants’ contributions and the profits or income, out of which payments are to be made for them and under which the participants are entitled to exchange rights in one pool for rights in another. A part of an umbrella scheme refers to the arrangements that relate to a separate pool. A unit trust scheme has the same meaning as in the Financial Services and Markets Act 2000 and a unit holder means a person entitled to a share of the investments subject to the trusts of a unit trust scheme. Section 620 of the Corporation Tax Act 2010 (court investment funds treated as authorised unit trusts) applies to the LBTT(S)A 2013, substituting references to an authorised unit trust with references to a unit trust scheme. A unit trust scheme is not to be treated as a company for the purpose of group relief, reconstruction relief or acquisition relief. LBTT(S)A 2013 section 45






LBTT5006 Open-ended investment companies Open-ended investment companies (OEICs) are defined in section 236 of the Financial Services and Markets Act 2000. For LBTT purposes, OEICs are treated as unit trust schemes and therefore they are liable for LBTT when they first acquire a land asset, but not each time new shareholders invest in the OEIC. LBTT(S)A 2013 section 46





LBTT5007 Persons acting in a representative capacity etc. The LBTT legislation provides for the executors or administrators of the estate of deceased persons to fulfill the obligations relating to LBTT arising from a land transaction entered into by the deceased person before he or she died. A receiver appointed by a UK court having the control of any property is responsible for discharging any obligations in relation to a transaction affecting that property, as if the property were not under the direction and control of the court. The person acting in a representative capacity is responsible for making any required LBTT returns, making declarations and paying any tax due. No special provision is made for incapacitated persons or minors. The general legal framework for assisting people who lack capacity, including the Adults with Incapacity (Scotland) Act 2000, will operate in relation to LBTT. LBTT(S)A 2013 section 51





LBTT5008 Industrial and Provident Societies For the avoidance of doubt, in terms of Industrial and Provident Societies the vesting of property in connection with the following provisions of the Industrial and Provident Societies Act 1965 (as amended) is not a land transaction and no LBTT is chargeable:

registration of a society under section 2 of that Act;

amalgamation of societies under section 50 of that Act;

conversion of a society into, or amalgamation with, a company under section 52 of that Act; and

conversion of a company into a society under section 53 of that Act.

However, vesting of property in a society or a company in consequence of a transfer of engagements under section 51 or 52 of that Act is a land transaction. LBTT will be chargeable in these circumstances.








http://www.legislation.gov.uk/ukpga/1965/12/crossheading/amalgamations-transfers-of-engagements-and-conversions


LBTT6001 Leases - Introduction This chapter of guidance refers to the taxation of non-residential leases, including agricultural leases, and mainly covers the provisions of schedule 19 to the LBTT(S)A 2013. Residential leases are generally exempt from LBTT (see LBTT3005) apart from certain long leases which are ‘qualifying leases’ for the purposes of section 1 of the Long Leases (Scotland) Act 2012 and which are not exempt. Qualifying leases are therefore taxed in the same way as non-residential leases. See LBTT3001 for further guidance on determining whether or not tax is payable. Separate guidance covering transitional arrangements for SDLT and LBTT is available. Licences to occupy property Licences of any type (whether residential or non-residential) are not within the scope of LBTT. No tax is due and a LBTT return does not need to be made. In practice, some licences are so like leases that they seem practically indistinguishable. However a key difference is that leases generally confer a ‘real right’ to the tenant, meaning that the tenant cannot be ejected from the property even if the landlord changes (e.g. following a sale of the property), or if the landlord becomes insolvent. Licences, by contrast, confer only a ‘personal right’ over the property to licensees. Licensees whose ‘landlord’ changes or goes bust face being ejected from the premises they occupy. Application of LBTT to leases The application of LBTT to leases reflects the principle that the transfer of an effective economic interest via a leasing arrangement should be taxed in a similar way to the transfer of an effective economic interest in a conventional sale. In other words, the tax position should not distort commercial choices as to whether to lease or purchase property. The method of calculating the tax due for leases under LBTT works in much the same way as it did under SDLT. The net present value (NPV) of the rent payable over the term of the lease is used to calculate the tax chargeable in respect of rent, although for LBTT the NPV is arrived at using the actual rent payable for each year of the lease (using estimated rent if the actual rent is not yet known, for example because of future rent reviews). In a change to the approach adopted for SDLT, the tax position for a lease that was subject to LBTT will be reviewed, and a further LBTT return must be submitted on every third anniversary of the lease (see LBTT6015) to take account of any changes that have taken place in the previous three years, for example to the rental





separate%20guidance%20is%20available%20covering%20transitional%20arrangements%20for%20SDLT%20and%20LBTT.


payments and any extensions or variations to the lease that have been agreed during that three year period. LBTT(S)A 2013 sections 52-53 The guidance for leases covers a number of topics and is structured as follows:

Effective date for lease transactions – LBTT6002

Determining the chargeable consideration for a lease transaction – LBTT6003

Chargeable consideration - Rent – LBTT6004

Variable or uncertain rent – LBTT6005

Consideration other than rent (i.e. a premium) – LBTT6006

Loans and deposits in connection with the grant or assignation of a lease – LBTT6007

Payments and other types of consideration that are not treated as ‘chargeable consideration’ for lease transactions – LBTT6008

Leases - Payment of tax and making a LBTT return – LBTT6009

Making a LBTT return and paying tax for a notifiable lease – LBTT6010

Tax due on the rent – LBTT6011

Tax due on the premium – LBTT6012

Leases - tax rates and bands – LBTT6013

Three yearly review of the tax chargeable – LBTT6014

LBTT return and payment of tax for review of a lease – LBTT6015

The lease review date – LBTT6016

Review of tax chargeable if the lease is assigned or terminated – LBTT6017

Other leases rules: – LBTT6018

A lease for a fixed term – LBTT6019

A lease that continues after a fixed term – LBTT6020

http://www.legislation.gov.uk/asp/2013/11/part/6/enacted


Treatment of leases for an indefinite term – LBTT6021

Treatment of successive linked leases – LBTT6022

Rent for overlap period when a further lease is granted – LBTT6023

Agreement for lease substantially performed – LBTT6024

Missives of let followed by execution of formal lease – LBTT6025

Cases where assignation of lease treated as grant of a lease – LBTT6026

Assignation of lease: responsibility of assignee for returns – LBTT6027

Reduction of rent or term or other variation of a lease – LBTT6028

Variation of a lease to extend the term of increase the rent causing the transaction to become notifiable – LBTT6029


LBTT6002 Effective date for lease transactions The effective date in relation to a lease depends on whether there are missives for let or an agreement for a lease which have been substantially performed before the formal lease is granted. If there are no missives for let or agreement for lease, the effective date is the date when it is executed by the parties or constituted in any other way. The date of grant of a formal lease in Scotland (i.e. the effective date of the lease) is the date of last execution of the lease. The usual practice is for both parties to sign the same engrossed document (a legal document which is in its final form). Accordingly, unless the parties meet to sign the document (which is very unusual), one party inevitably signs later than the other. Note also that, as a result, Scottish leases commonly bear two dates, being the actual dates of execution by the parties. The date of grant of a lease constituted by missives of let (which are not to be followed by a formal lease) is the date of conclusion of missives. See LBTT6025 for more information on missives of let. Where the formal lease is preceded by missives of let or an agreement for lease, substantial performance of the missives of let or agreement for lease is the effective date. Substantial performance is constituted by the tenant taking possession of the subjects of the lease or making the first payment of rent or the premium. The same applies to missives for a variation or extension to the term of the lease, although it should be borne in mind that substantial performance does not take place until the expiry of the existing lease. LBTT(S)A 2013 section 63



LBTT6003 Determining the chargeable consideration for a lease transaction The following guidance will help determine the chargeable consideration for a lease transaction.

Chargeable consideration – Rent – LBTT6004

Variable or uncertain rent – LBTT6005

Consideration other than rent (i.e. a premium) - LBTT6006

Loans and deposits in connection with the grant or assignation of a lease - LBTT6007

Payments that are not treated as ‘chargeable consideration’ for lease transactions - LBTT6008


LBTT6004 Chargeable consideration - Rent The rent payable under a lease is chargeable consideration for LBTT. For LBTT it is the actual rent payable for each year of the lease which is used. If there is a chargeable transaction which wholly or partly consists of rent or other consideration but is not apportioned (e.g. a service charge which is lumped in with rent as one single payment), the whole of that consideration is to be treated as rent and is chargeable to LBTT. LBTT(S)A 2013 schedule 19 paragraph 12 Where the landlord has elected to waive exemption from VAT as at the effective date, the rent for LBTT purposes includes the VAT chargeable. An option to tax made after the effective date does not affect the rent for the purposes of the 3 year review. LBTT(S)A 2013 schedule 2 paragraph 2




LBTT6005 Variable or uncertain rent If the amount of rent to be paid varies in accordance with the provisions of the lease (for example where there are rent reviews or in turnover leases), then a reasonable estimate of the rent for each year of the lease should be provided in the LBTT return. (In the case of an open market rent review, it will normally be acceptable to estimate the rent payable after review as being the same as the passing rent). However where the rent is adjusted in line with the Retail Prices Index, Consumer Prices Index or any similar index in accordance with the provisions in the lease, it is not treated as variable or uncertain rent. (But the adjusted rent should be used for the purposes of making a LBTT return). LBTT(S)A 2013 schedule 19 paragraph 13 If the amount of rent to be paid is contingent on the occurrence of an uncertain future event, then the rent figure used in the LBTT return is determined on the assumption that the outcome of the contingency will result in the rent being paid, or as the case may be, will not cease to be payable. LBTT(S)A 2013 section 18 LBTT(S)A 2013 schedule 19 paragraph 13 If the amount of rent to be paid depends on uncertain future events, then a reasonable estimate of the rent should be provided in the LBTT return. LBTT(S)A 2013 section 19 LBTT(S)A 2013 schedule 19 paragraph 13 The cases where the amount of rent is uncertain or unascertained includes cases where there is a possibility that the rent is varied under section 13, 14, 15 or 31 of the Agricultural Holdings (Scotland) Act 1991 or section 9, 10 or 11 of the Agricultural Holdings (Scotland) Act 2003. Where a contingency ceases or it becomes clear that it will not occur, or where uncertain or unascertained consideration becomes ascertained and as a result less tax is payable, a claim for repayment cannot be made to the extent that the consideration consists of rent. LBTT(S)A 2013 section 32(3) In addition, it is not possible to apply for deferment of LBTT payable in relation to a lease where there is contingent or unascertained consideration that consists of rent. LBTT(S)A 2013 section 41(5)













LBTT6006 Consideration other than rent (i.e. a premium) Consideration given by a tenant to a landlord for the grant of a lease will be subject to LBTT as a premium (sometimes referred to as a grassum) in the same way as other chargeable consideration for the acquisition of a chargeable interest in land, at a fixed percentage rate, depending on the amount. Where the tenant pays the landlord's reasonable fees in connection with the grant of a lease, this does not count as a premium (see LBTT6012). LBTT(S)A 2013 schedule 19 part 3



LBTT6007 Loans and deposits in connection with the grant or assignation of a lease Where a tenant (or any person connected with or acting on behalf of the tenant) makes a loan or pays a deposit (whether to the landlord or to a third party), the repayment of which is contingent on anything to be done or not to be done by the tenant or on the death of the tenant, then the amount of the loan or the deposit is to be treated as consideration, other than rent paid by the tenant for the grant of the lease. Where an assignee (or any person connected with or acting on behalf of the assignee) makes a loan or pays a deposit (whether to the landlord or to a third party), the repayment of which is contingent on anything to be done or not to be done by the assignee or on the death of the assignee, then the amount of the loan or the deposit is to be treated as consideration, other than rent paid by the assignee for the assignation of the lease. These rules do not apply however where the deposit does not exceed twice the relevant maximum rent. The relevant maximum rent in relation to the grant of a lease is the highest amount of rent payable in respect of any consecutive 12 month period during the term of the lease. In relation to the assignation of a lease, the relevant maximum rent is the highest amount of rent payable in respect of any consecutive 12 month period during the term of the lease remaining outstanding at the date of the assignation. In determining the highest amount of rent, where applicable any contingent, uncertain or unascertained rent should be included. However, any rent previously taxed in an overlap period (see LBTT6023) should be disregarded. Tax is not chargeable if it would only be chargeable because the nil rate tax band was excluded (where the relevant rent attributable to non-residential property is less than £1,000 per year). LBTT(S)A 2013 schedule 19 paragraph 17



LBTT6008 Payments and other types of consideration that are not treated as ‘chargeable consideration’ for lease transactions None of the following is treated as a chargeable consideration and is not, therefore, subject to LBTT: 1) When a lease is granted:

any undertaking by the tenant to repair, maintain or insure the leased premises;

any undertaking by the tenant to pay for services, repairs, maintenance, insurance or the landlord’s costs of management;

any other obligation by the tenant that would affect the rent that a tenant would pay in the open market;

any guarantee of the payment of rent or the performance of any other obligation under the lease;

any penal rent or increased rent in the nature of penal rent, payable as a result of a breach of an obligation of the tenant under the lease;

any other obligation of the tenant to bear the landlord’s reasonable costs or expenses of, or incidental, to the grant of a lease;

any obligation under the lease to transfer to the landlord on termination of the lease payment entitlements granted to the tenant under the single payment scheme (the scheme of income support for farmers under Title III of Council Regulation (EC) No 73/2009) in relation to land subject to the lease;

a payment made in discharge of any of the obligations in this list; or

in relation to the renunciation of a lease, the release of any of the obligations in this list.

LBTT(S)A 2013 schedule 19 paragraph 15 2) Where a lease is assigned, the assumption by the assignee of the obligation to pay the rent or any other undertaking by the tenant under the lease is not treated as chargeable consideration. LBTT(S)A 2013 schedule 19 paragraph 16 3) Any reverse premium paid:

by the landlord to the tenant where a lease is granted;

by the assignor to the assignee when a lease is assigned; or




by the tenant to the landlord when a lease is renunciated. LBTT(S)A 2013 schedule 19 paragraph 14 4) Where a lease is granted in consideration of the renunciation of an existing lease between the same parties, the grant of the new lease does not count as chargeable consideration for the renunciation and the renunciation does not count as chargeable consideration for the grant of the new lease. LBTT(S)A 2013 schedule 19 paragraph 18




LBTT6009 Leases - Payment of tax and making a LBTT return The following guidance will help determine whether the lease transaction is notifiable and therefore if a LBTT return should be made to us. It will also help determine whether any tax is payable on the transaction and, if so, how much.

Making a LBTT return and paying tax for a notifiable lease - LBTT6010

Tax due on the rent - LBTT6011

Tax due on the premium - LBTT6012

Leases - tax rates and bands - LBTT6013


LBTT6010 Making a LBTT return and paying tax for a notifiable lease Transactions in relation to leases are notifiable (in other words a LBTT return has to be made to us) except in the following circumstances:

the grant of a lease for a period of seven years or more, where the chargeable consideration is less than £40,000 and the ‘relevant rent’ is less than £1,000 per annum (see also section 30(4) of the LBTT(S)A 2013 regarding ‘relevant rent’);

the grant of a lease for a period of less than seven years, where the chargeable consideration does not exceed the nil rate band;

the assignation or renunciation of a lease where the lease was originally granted for a period of seven years or more and the consideration for the assignation or renunciation of the lease is less than £40,000; and

the assignation or renunciation of a lease where the lease was originally granted for a period of less than seven years and the consideration for the assignation or renunciation does not exceed the nil rate band.

LBTT(S)A 2013 section 30 A LBTT return in relation to a notifiable lease must be made to us within 30 days of the effective date of the lease. The date the LBTT return is required to be made by is the filing date (see LBTT1000). Depending on the circumstances a further LBTT return may also be required at some point – see:

return on three yearly review of a lease - see LBTT6015;

return on assignation or termination of lease – see LBTT6017;

return where lease for fixed term continues after end of term - see LBTT6020;

return in relation to lease for indefinite term – see LBTT6021; and

transactions which become notifiable on variation of rent or term – see LBTT6029.

Any tax due must be paid at the same time as the LBTT return is made to us. For this purpose, tax is treated as paid if arrangements satisfactory to us are made for the payment of the tax (see LBTT4008). Where the lease is to be registered, the LBTT return has to be made and any tax paid before registration can take place. Guidance on 'How to make a LBTT return and pay tax' is available separately on our website.





Once the LBTT return has been made, subject to certain restrictions it can be amended up to 12 months after the filing date - see LBTT4006. LBTT(S)A 2013 section 40 A tenant who fails to make a LBTT return to us by the filing date is liable to a penalty (see RSTP3005). If the return contains an inaccuracy, the tenant may also be liable to a penalty (see RSTP3011). A tenant who fails to pay tax prior to the expiry of 30 days after the date payment is due (the day the LBTT return is made) is liable to a penalty (see RSTP3008). Interest will be charged however on the amount of any unpaid tax from the filing date until the date it is paid (see RSTP4002). A tenant required to make a LBTT return to us, or who is the tenant in a land transaction which is not notifiable, is also required to keep and preserve certain records. See LBTT9001 for further guidance.







LBTT6011 Tax due on the rent The tax chargeable for the rental element of a lease is determined by calculating the tax that is due on the rent using the net present value (‘NPV’) of the rent payable over the term of the lease. The calculation of the NPV of the rent has three elements. The first element is the temporal discount rate. The temporal discount rate is set in legislation at 3.5%. The effect of applying the rate is to calculate the value today—the present value—of rents that will be paid in the future. It is important to remember that the beginning of the period this calculation runs from is the start of the period of the lease. This may not be the present but a time in the future. LBTT(S)A 2013 schedule 19 paragraph 7 The second element of the calculation is the term of the lease. The third element is the amount of rent payable. Once the term of the lease and the rent payable have been ascertained or estimated (if the actual rent is not yet known), and remembering that any VAT chargeable must be included in the rent calculation), a statutory formula is used to calculate the NPV of rental payments. The tax rates and bands are then applied accordingly to work out the tax due on the rent. The LBTT tax calculator for lease transactions on our website will help work this out. This calculator is for reference purposes only. LBTT(S)A 2013 schedule 19 paragraphs 3-6 Tax due on the rent for linked transactions There is a similar calculation involved for a lease that is one of a number of linked transactions. It uses the same formula to calculate the total of the net present values of the rent payable over the terms of all the leases. The tax rates and bands are then applied to that total to work out the total tax chargeable in respect of rent but using only one nil rate band for all of the leases. To calculate the tax chargeable for each individual lease, the total tax chargeable in respect of rent is multiplied by the net present value of that lease expressed as a proportion of the total net present value of all the leases in the linked transactions. LBTT(S)A 2013 schedule 19 paragraph 5


https://www.revenue.scot/land-buildings-transaction-tax/tax-calculator/lbtt-lease-transactions-calculator




LBTT6012 Tax due on the premium Tax is due on any premium paid in addition to rent, which the LBTT(S)A 2013 describes as ‘consideration other than rent’. The premium is taxed using the tax rates that apply to purchases of non-residential property. LBTT(S)A 2013 schedule 19 paragraph 8 However where the ‘relevant rent’ (in other words the average rent) over the term of the lease is at least £1,000 per annum, the nil rate tax band does not apply in relation to the premium; all such consideration is taxed at the tax rate of the next tax band. LBTT(S)A 2013 schedule 19 paragraph 9 The sum of the tax due on the rent and premium gives the total amount of tax due on the lease. LBTT(S)A 2013 schedule 19 paragraph 2 Treatment of the premium in linked transactions The normal rules for calculating tax apply where the lease forms one of a number of linked transactions. However, where the lease forms one of a number of linked transactions, the main subject matter of the transactions is partly residential property and partly non-residential property and the ‘relevant rent’ of the non-residential property is at least £1,000 per annum, special rules apply. In such cases, the transactions are treated as if they were two sets of transactions; one whose subject matter consists of interests in all the residential property and one whose subject matter consists of interests in all the non-residential property, based on a just and reasonable apportionment of both. For the purposes of calculating the tax on the premium, the ‘relevant rent’ is either:

the annual rent in relation to the transaction; or

if the lease forms one of a number of linked transactions, then the relevant rent is the total annual rents for all the transactions.

The ‘annual rent’ is the average annual rent over the term of the lease or, if different amounts are payable for different parts of the term and those amounts are known at the effective date, then the annual rent is the average annual rent over the term of the lease for which the highest ascertainable rent is payable. LBTT(S)A 2013 schedule 19 paragraph 9






LBTT6013 Leases - tax rates and bands For chargeable leases, the following tax rates and bands apply to the Net Present Value (NPV) of the rent payable under the lease:

NPV of rent payable LBTT rate

Up to £150,000 0%

Above £150,000 1%

LBTT may also be payable on chargeable consideration other than rent, such as a premium. The standard tax rates and bands for non-residential property transactions apply to any such payments under a lease (except in the case of qualifying leases where there is a premium paid, which will be taxable at the residential rates):

Premium LBTT rate

Up to £150,000 0%

Above £150,000 to £350,000 3%

Above £350,000 4.5%

We have developed an online tax calculator on our website for help in working out the amount of LBTT payable on lease transactions. This calculator is for reference purposes only. LBTT(S)A 2013 schedule 19 paragraph 3 LBTT(S)A 2013 schedule 19 paragraph 8 The Land and Buildings Transaction Tax (Tax Rates and Tax Bands) (Scotland) Order 2015 (Note: This is currently draft legislation)

https://www.revenue.scot/land-buildings-transaction-tax/tax-calculator/lbtt-lease-transactions-calculator






LBTT6014 Three yearly review of the tax chargeable For tax purposes, leases have to be treated quite differently to standard purchases of land and buildings. In most cases, when a purchase is completed, any LBTT is paid and the title is registered; there is no likelihood of change to the tax position. Leases, however, often continue over a period of years and can be subject to change through, for example, variations, extensions, assignations, rent reviews and tacit relocation, and the tax position must be reviewed to give effect to these changes. The LBTT legislation does not require a further LBTT return to be submitted to us every time a change to the lease takes place. Instead, it requires that unless the lease has been terminated or assigned, a further LBTT return is to be submitted by the tenant at every third anniversary of the effective date of the lease (i.e. year 3, year 6, year 9 etc.) and any additional LBTT paid or overpaid LBTT reclaimed. This LBTT return will inform us of any changes that have occurred since the effective date or last review date and will allow us to review the amount of tax chargeable on the lease taking account of those changes. Similarly, the rent - as well as the lease - can be subject to changes, such as variations in turnover-based rents. This is a change from the position applicable under SDLT. Further guidance on completing a LBTT return in relation to the review of a lease, and the lease review date, can be found here:

LBTT return and payment of tax for review of a lease – LBTT6015

The lease review date – LBTT6016




LBTT6015 LBTT return and payment of tax for review of a lease The tenant must make a LBTT return to us within 30 days beginning with the day after the review date. The return must be made irrespective of whether there is a change in the tax that is payable. The date the return is required to be made by is the filing date (see LBTT1000). The LBTT return must include an assessment of the amount of tax chargeable at the review date, calculated using the tax rates and bands that were in force at the effective date of the transaction (such as when the tenant took entry under the missives or agreement for lease, or the lease was granted or substantial performance took place as a result of the payment of rent). If it is calculated that more tax is payable at the review date (such as where rent reviews or turnover rents turned out to be more than had previously been estimated), payment of the additional tax due must be made at the same time as the LBTT return is made. Guidance on 'How to make a LBTT return and pay tax' is available separately on our website. Once the LBTT return has been made, subject to certain restrictions it can be amended up to 12 months after the filing date - see LBTT4006. If it is calculated that less tax is payable at the review date (for example, because the lease has been varied to reduce the spatial area of the premises subject to the lease and the rent has been reduced accordingly) then a claim for repayment of tax should be submitted in the LBTT return. LBTT(S)A 2013 schedule 19 paragraph 10 A tenant who fails to make a LBTT return to us by the filing date is liable to a penalty (see RSTP3005). If the return contains an inaccuracy, the tenant may also be liable to a penalty (see RSTP3011). A tenant who fails to pay tax prior to the expiry of 30 days after the date payment is due (the day the return is made) is liable to a penalty (see RSTP3008). Interest will be charged however on the amount of any unpaid tax from the filing date until the date it is paid (see RSTP4002). A tenant required to make a LBTT return to us, or who is the tenant in a land transaction which is not notifiable, is also required to keep and preserve certain records. See LBTT9001 for further guidance.








LBTT6016 The lease review date The date of the review of the tax chargeable may differ, depending on the circumstances:

where the tenant made a LBTT return when the lease was granted, the review date is the day of the third anniversary of the effective date of the transaction, and on each subsequent third anniversary of that date;

where the first LBTT return for the lease was made because of the effect of the rules about contingent, uncertain or unascertained consideration, the review date is the third anniversary of the event in relation to the contingent, uncertain or unascertained consideration that triggered the first return;

where the first LBTT return for the lease was made because the lease continued beyond its fixed term and as a result became notifiable, the review date is the third anniversary of the end of the one year period after the end of the fixed term of the lease, and on each subsequent third anniversary of that date;

where the first LBTT return for a lease with an indefinite term was made because the lease continued after the end of a deemed fixed term and as a result became notifiable, the review date is the third anniversary of the date on which the deemed fixed term ended, and on each subsequent third anniversary of that date; and

where the first LBTT return has been made for a lease that became notifiable as a result of an extension to the term or an increase in the rent, the review date is the third anniversary of the date of the variation that made the lease notifiable, and on each subsequent third anniversary of that date.




LBTT6017 Review of tax chargeable if the lease is assigned or terminated Where a lease has been notified to us and is later assigned or terminated (for any reason, including a renunciation of the lease), the original tenant must make a further LBTT return to us within 30 days of the day after the lease was assigned or terminated. The date the LBTT return is required to be made by is the filing date (see LBTT1000). See LBTT6027 for guidance on the responsibilities that the assignee assumes after the effective date of the assignation. The LBTT return must include an assessment of the amount of tax chargeable reflecting any changes that have been to the lease since the previous return was submitted (either the first return or the return made at the last three year review – it is important to note that in the case of an assignation the assignee will still be required to make a LBTT return on every third anniversary of the effective date of the lease, and this cycle does not start again upon assignation. An assignation made in year two, for example, will still require a return in year three, unless it is terminated before then). The assessment of the amount of tax chargeable should be calculated using the tax rates and bands that were in force at the effective date of the transaction (in other words when the tenant took entry under the missives or agreement for lease, or the lease was granted). If it is calculated that more tax is payable, payment of the additional tax due must be made at the same time as the LBTT return is made. Guidance on 'How to make a LBTT return and pay tax' is available separately on our website. Once the LBTT return has been made, subject to certain restrictions it can be amended up to 12 months after the filing date - see LBTT4006. If it is calculated that less is tax payable at the date of the assignation or termination because of changes that have been made to the lease since the last return was made, then a claim for repayment of tax should be submitted to us in the LBTT return. A claim for repayment may arise, for example, because rent reviews or turnover rents turned out to be less that had previously been estimated. This does not include a claim for repayment of tax in relation to the reduction of the term of the lease arising from either the assignation or the termination of the lease itself. LBTT(S)A 2013 schedule 19 paragraph 11 A tenant who fails to make a LBTT return to us by the filing date is liable to a penalty (see RSTP3005). If the return contains an inaccuracy, the tenant may also be liable to a penalty (see RSTP3011).






A tenant who fails to pay tax prior to the expiry of 30 days after the date payment is due (the day the LBTT return is made) is liable to a penalty (see RSTP3008). Interest will be charged however on the amount of any unpaid tax from the filing date until the date it is paid (see RSTP4002). A tenant required to make a LBTT return to us, or who is the tenant in a land transaction which is not notifiable, is also required to keep and preserve certain records. See LBTT9001 for further guidance.




LBTT6018 Other leases rules The following rules also apply to leases in relation to LBTT:

A lease for a fixed term – LBTT6019;

A lease that continues after a fixed term - LBTT6020;

Treatment of leases for an indefinite term - LBTT6021;

Treatment of successive linked leases - LBTT6022;

Rent for overlap period when a further lease is granted - LBTT6023;

Agreement for lease substantially performed - LBTT6024;

Missives of let followed by execution of formal lease - LBTT6025;

Cases where assignation of lease treated as grant of a lease - LBTT6026;

Assignation of lease: responsibility of assignee for returns - LBTT6027;

Reduction of rent or term or other variation of a lease - LBTT6028; and

Variation of a lease to extend the term or increase the rent causing the transaction to become notifiable - LBTT6029.

LBTT(S)A 2013 schedule 19 Part 6



LBTT6019 A lease for a fixed term When assessing the tax in relation to a lease for a fixed term, any contingency which might lead to the lease being terminated before the end of the fixed term and any right of either party to terminate or renew the lease (such as a break clause or an option to renew) are to be disregarded. LBTT(S)A 2013 schedule 19 paragraph 19



LBTT6020 A lease that continues after a fixed term The set of rules below only apply in relation to leases subject to LBTT. A lease may continue after its fixed term by agreement (whether informal or formal) between the parties or by the operation of law (tacit relocation). Such a lease is treated as if it were a lease for the original fixed term and no longer. If it continues after the end of the term, it is treated as if it were a lease for one year longer. As it continues, each year a further year is added to the term of the lease. If the lease was previously notifiable, no LBTT return is required each time the lease continues, and the details are included in the next three year return. Where a lease transaction which was not previously notifiable becomes notifiable because of the continuation of the lease beyond its fixed term, a LBTT return will be required within 30 days of the day after the end of the one year period when it became notifiable. The date the return is required to be made by is the filing date (see LBTT1000). The assessment of the amount of tax chargeable should be calculated using the tax rates and bands that were in force at the effective date of the original lease. Any additional tax due must be paid at the same time as the LBTT return is made. Guidance on 'How to make a LBTT return and pay tax' is available separately on our website. Once the LBTT return has been made, subject to certain restrictions it can be amended up to 12 months after the filing date - see LBTT4006. A tenant who fails to make a LBTT return to us by the filing date is liable to a penalty (see RSTP3005). If the return contains an inaccuracy, the tenant may also be liable to a penalty (see RSTP3011). A tenant who fails to pay tax prior to the expiry of 30 days after the date payment is due (the day the LBTT return is made) is liable to a penalty (see RSTP3008). Interest will be charged however on the amount of any unpaid tax from the filing date until the date it is paid (see RSTP4002). A tenant required to make a LBTT return to us, or who is the tenant in a land transaction which is not notifiable, is also required to keep and preserve certain records. See LBTT9001 for further guidance. LBTT(S)A 2013 schedule 19 paragraph 20 However, where a lease continues beyond its fixed term and during the one year period beyond the fixed term a new lease is granted to the tenant for the same (or substantially the same) premises, then the new lease is treated as beginning immediately after the end of the fixed term of the original lease. Any rent which was payable under the original lease after the end of the fixed term is treated as payable under the new lease. If the original lease has been extended more than once then








the new lease is treated as beginning immediately after the end of the original lease as it was extended. LBTT(S)A 2013 schedule 19 paragraph 21



LBTT6021 Treatment of leases for an indefinite term Where a lease is granted for an indefinite term, the legislation makes provision to determine how long the lease lasts. For notification purposes, a lease with an indefinite term is defined as a lease for a term of less than seven years and includes an interest or right terminable by a period of notice or by notice at any time. A lease is not treated as being for an indefinite term if the term can be ascertained from the lease or agreement for lease. The continuation of the lease may trigger notification of the lease and, if the lease continues, may result in tax being chargeable. The lease is treated as a lease for a fixed term of one year. If it continues, it is treated as a lease for a fixed term of two years, then three years, and so on. If no LBTT return has been made but, as result of the continuation of the lease the lease becomes notifiable, the tenant must submit a LBTT return within 30 days of the end of the one year period at which the transaction became notifiable. The date the return is required to be made by is the filing date (see LBTT1000). The LBTT return must include an assessment of the amount of tax chargeable, which should be calculated using the tax rates and bands that were in force at the effective date of the transaction. Any additional tax due must be paid at the same time as the return is made. Guidance on 'How to make a LBTT return and pay tax' is available separately on our website. Once the LBTT return has been made, subject to certain restrictions it can be amended up to 12 months after the filing date - see LBTT4006. A tenant who fails to make a LBTT return to us by the filing date is liable to a penalty (see RSTP3005). If the return contains an inaccuracy, the tenant may also be liable to a penalty (see RSTP3011). A tenant who fails to pay tax prior to the expiry of 30 days after the date payment is due (the day the LBTT return is made) is liable to a penalty (see RSTP3008). Interest will be charged however on the amount of any unpaid tax from the filing date until the date it is paid (see RSTP4002). A tenant required to make a LBTT return to us, or who is the tenant in a land transaction which is not notifiable, is also required to keep and preserve certain records. See LBTT9001 for further guidance. LBTT(S)A 2013 schedule 19 paragraph 22








LBTT6022 Treatment of successive linked leases Successive leases of the same premises between the same parties (and which are otherwise linked transactions) are treated as one lease for the purposes of LBTT. Successive linked leases are treated as being granted at the time of the grant of the first lease in the series, for a term equal to the aggregate of the terms of all the leases and in consideration of the rent payable under all the leases. LBTT(S)A 2013 schedule 19 paragraph 23 Where, as the result of the grant of a later linked lease, the transaction becomes notifiable, or additional tax is payable in respect of the earlier transaction, or tax is payable in respect of the earlier transaction where none was payable before, the tenant must make a LBTT return to us within 30 days of the day after the effective date of the later transaction. The return must include an assessment of the amount of tax chargeable as a result of the later transaction, using the tax rates and bands that were in force at the effective date of the earlier transaction. LBTT(S)A 2013 section 34




LBTT6023 Rent for overlap period when a further lease is granted Rent paid during an ‘overlap period’ between the end of one lease and the grant of another is treated as paid under the old lease and not the new lease. The overlap period is the period between the date of the grant of the new lease and what would have been the end of the term of the old lease had it not been terminated. The rent payable under the new lease is treated as reduced by the amount of rent that would have been payable during the overlap period under the old lease (but cannot be a negative amount). The rent that would have been payable under the old lease is the amount of rent used in determining the tax chargeable in respect of the acquisition of the old lease. There are three circumstances where this applies:

where party A renounces an existing lease to party B, and in consideration for the renunciation, party B grants a lease (the new lease) to party A of the same (or substantially the same) premises;

where on termination of a lease (the head lease) a sub-tenant is granted lease (the new lease) of the same (or substantially the same) premises as the tenant’s ‘old lease’ in pursuance of a contractual entitlement arising in the event of the head lease being terminated; and

where a person who has guaranteed the obligations of a tenant under a lease that has been terminated (the old lease) is granted a lease of the same (or substantially the same) premises (the new lease) in pursuance of the guarantee.




LBTT6024 Agreement for lease substantially performed Where parties enter into an agreement for lease under which a lease is to be executed and the agreement is substantially performed without a lease having been executed, the agreement is treated as if it were the grant of a lease (referred to as a ‘notional lease’) that started on the date it was substantially performed in accordance with the agreement between the parties. The effective date of the transaction is the date when the agreement was substantially performed. If at a later time a lease is formally executed (referred to as the ‘actual lease’), then LBTT is charged as if the notional lease was granted on the date it was substantially performed, for a term that begins on the date of substantial performance and ends in accordance with the dates set out in the actual lease and in consideration for the total rent payable over that term and any other consideration given for the agreement of the actual lease. The actual lease must either be in conformity with, or relate to substantially the same premises and term as, the agreement. The grant of the notional lease and the grant of the actual lease are treated as linked, regardless of whether the provisions about linked transactions in the Act would have linked them in any case. The tenant under the actual lease is liable for any tax or additional tax due in relation to the notional lease. The original return for the notional lease may need to be amended to reflect the adjusted basis of the notional lease following the execution of the actual lease. Where an agreement for lease is substantially performed without a lease being executed and it is later annulled or not carried into effect, the tenant may amend the LBTT return to claim for a repayment of tax from us. Guidance on 'How to amend a LBTT return' is available separately on our website. LBTT(S)A 2013 schedule 19 paragraph 25




LBTT6025 Missives of let followed by execution of formal lease Where a lease is agreed by concluded missives of let (referred to as the ‘first lease’), and the execution of a formal lease (the ‘second lease’) takes place at a later date, the missives of let are treated as a lease granted on the date the missives of let were concluded, for a term which begins with that date but ends at the end of the term of the second lease and in consideration of the total rent payable over that term, plus any other consideration given for the first or the second lease. The second lease must be either in conformity with, or relate to substantially the same premises and term as, the first lease. The second lease is disregarded for the purposes of the tax unless a LBTT return is required because there is a second transaction that is linked to the first transaction and makes the first transaction notifiable. The effective dates (see LBTT6002) of the first lease and the second lease are the dates of completion, i.e. the dates when they are executed by the parties or constituted by any other means. For the purposes of this rule, a reference to the execution of a lease are to the execution of a lease that conforms with or relates to substantially the same premises as the missives of let. The grant of the first lease and the grant of the second lease are linked, regardless of whether the provisions about linked transactions in the LBTT(S)A 2013 would have linked them in any case. The tenant under the second lease is liable for any tax, or additional tax, due in relation to the first lease. LBTT(S)A 2013 schedule 19 paragraph 26



LBTT6026 Cases where assignation of lease treated as grant of a lease Where one of the following tax reliefs was claimed on the grant of a lease:

sale and leaseback relief – see LBTT3011;

relief for alternative finance investment bonds – see LBTT3021;

group relief – see LBTT3025;

reconstruction relief or acquisition relief – see LBTT3029;

charities relief – see LBTT3035; or

public bodies relief – see LBTT3040, and the lease is assigned to a different tenant and none of those tax reliefs would apply, then the assignation is treated as the grant of a new lease by the assignor for the remaining term of the lease and on the terms agreed to by the assignee. This rule does not apply where group relief, reconstruction relief, acquisition relief or charities relief was claimed on the grant of the lease but has been withdrawn prior to the effective date of the assignation. LBTT(S)A 2013 schedule 19 paragraph 27



LBTT6027 Assignation of lease: responsibility of assignee for returns Where a lease is assigned, then after the effective date of the assignation the assignee assumes the assignor’s duties in relation to LBTT. The relevant provisions of the LBTT(S)A 2013 which apply to the assignee are the requirements to submit a LBTT return (or further LBTT return):

where contingency ceases or consideration is ascertained – see LBTT4021;

in consequence of a later linked transaction – see LBTT4015;

on every third anniversary – see LBTT6015;

on assignation or termination of the lease – see LBTT6017;

where a lease for a fixed term continues after the end of the term – see LBTT6020;

in relation to a lease for an indefinite term – see LBTT6021; and

where a transaction becomes notifiable because of a variation to the rent or the term of the lease – see LBTT6029.

Anything that was done by the assignor in relation to the lease is to be treated as if it was done by the assignee. See LBTT6017 for guidance on the review of a lease which was originally notified to us and is later assigned or terminated. This rule does not apply if the assignation of the lease is treated as the grant of a lease (see LBTT6026). LBTT(S)A 2013 schedule 19 paragraph 28



LBTT6028 Reduction of rent or term or other variation of a lease Variations are not generally treated under Scots law as creating new leases. However, there are three types of variation of a lease which are treated for the purposes of the tax as acquisitions of a chargeable interest:

where a lease is varied to reduce the amount of the rent, the variation is treated as the acquisition of a chargeable interest by the tenant;

where any consideration is paid by the tenant (other than an increase in rent) for any variation of the lease (other than a variation in the amount of rent or the term of the lease), the variation is treated as the acquisition of a chargeable interest by the tenant; and

where a lease is varied to reduce the term, the variation is treated as the acquisition of a chargeable interest by the landlord.




LBTT6029 Variation of a lease to extend the term or increase the rent causing the transaction to become notifiable Where a lease is varied to extend its term or increase the rent payable, and the effect is that the lease (had it originally been granted for the increased rent/term) would have been notifiable to us when it was not previously notifiable, the tenant must submit a LBTT return within 30 days of the day after the date from which the variation takes effect (known as the ‘relevant date’). The date the return is required to be made by is the filing date (see LBTT1000). The LBTT return must include an assessment of the amount of tax chargeable at the review date, calculated using the tax rates and bands that were in force at the effective date of the lease. Any tax due must be paid at the same time as the LBTT return is made. Guidance on 'How to make a LBTT return and pay tax' is available separately on our website. Once the LBTT return has been made, subject to certain restrictions it can be amended up to 12 months after the filing date - see LBTT4006. LBTT(S)A 2013 schedule 19 paragraph 30 A tenant who fails to make a LBTT return to us by the filing date is liable to a penalty (see RSTP3005). If the return contains an inaccuracy, the tenant may also be liable to a penalty (see RSTP3011). A tenant who fails to pay tax prior to the expiry of 30 days after the date payment is due (the day the LBTT return is made) is liable to a penalty (see RSTP3008). Interest will be charged however on the amount of any unpaid tax from the filing date until the date it is paid (see RSTP4002). A tenant required to make a LBTT return to us, or who is the tenant in a land transaction which is not notifiable, is also required to keep and preserve certain records. See LBTT9001 for further guidance.








LBTT7001 – Partnerships This chapter covers the rules regarding partnerships and LBTT and mainly relates to the provisions contained in schedule 17 to the LBTT(S)A 2013. The following are the circumstances in which LBTT liability will arise when partnerships deal with chargeable interests:

when a partnership acquires a chargeable interest and enters into the land

transaction as the buyer (ordinary partnership transactions – see LBTT7004);

when a chargeable interest is transferred to a partnership by a partner, a

person who will become a partner or a person connected (see LBTT7003) to

either the partner or person who will become a partner;

when a chargeable interest is transferred from a partnership to a person who

is or was a partner, or is connected (see LBTT7003) with such a person; and

when a chargeable interest is transferred from a partnership to another

partnership.

The guidance in this chapter is structured as follows:

General rules about the treatment of partnerships – LBTT7002

Interpretation – LBTT7003

Ordinary partnership transactions – LBTT7004

Transactions involving the transfer of a chargeable interest to a partnership – LBTT7005

Transfer of a partnership interest pursuant to arrangements that were in place at the time of a land transfer – LBTT7006

Withdrawal of money etc. from partnership after transfer of chargeable interest - LBTT7007

Transactions involving the transfer of a chargeable interest from a partnership to a person who is or was a partner, or is connected with such a person - LBTT7008

When a chargeable interest is transferred between partnerships - LBTT7009

Transfers involving leases – LBTT7010



Property investment partnerships – LBTT7011

Exemptions, reliefs and notification – LBTT7012


LBTT7002 General rules about the treatment of partnerships For the purposes of the LBTT(S)A 2013, a partnership means:

a partnership within the Partnership Act 1890;

a limited partnership registered under the Limited Partnerships Act 1907;

a limited liability partnership formed under the Limited Liability Partnerships

Act 2000 or the Limited Liability Partnerships Act (Northern Ireland) 2002 (all

UK limited liability partnerships are now governed by the 2000 Act); or

a firm or entity that is similar to any of the above.

LBTT(S)A 2013 schedule 17 paragraph 2 Scottish partnerships have legal personality. For the purposes of LBTT however, a chargeable interest held by a partnership is treated as if it is held by or on behalf of the partners and any land transaction entered into for the purposes of a partnership is treated as if it is entered into by or on behalf of the partners and not by the partnership. These provisions apply notwithstanding that the partnership is regarded as a legal person, or as a body corporate, under the law of the country or territory under which it is formed. In other words, partnerships are treated in the same way for the purposes of LBTT whether they are governed by the law of Scotland, of England and Wales, or of another country or territory.

LBTT(S)A 2013 schedule 17 paragraph 3 For simple partnership transactions see LBTT7004 (ordinary partnership transactions). Acquiring an interest in a partnership that holds chargeable interests as a partner does not in itself constitute a land transaction unless any of the following provisions within the LBTT(S)A 2013 apply:

Part 4 of schedule 17 (transfer of chargeable interest to a partnership – see

LBTT7005);

Paragraph 17 of schedule 17 (transfer of a partnership interest pursuant to

earlier arrangements – see LBTT7006); and

Paragraph 32 of schedule 17 (transfer of interest in a property investment

partnership – see LBTT7011).


http://www.legislation.gov.uk/ukpga/Vict/53-54/39/contents

http://www.legislation.gov.uk/ukpga/Edw7/7/24/contents







http://www.legislation.gov.uk/asp/2013/11/schedule/17/part/4/crossheading/transfer-of-partnership-interest-pursuant-to-earlier-arrangements




Continuity of partnership For the purposes of LBTT, a partnership is treated as the same partnership notwithstanding a change in membership if any person who was a member before the change remains a member after the change. This does not change the requirement that for a partnership to exist there must be more than one partner. If, for instance, partners B and C leave a three person partnership consisting of A, B and C, the partnership ceases to exist. If, at a later date, D joins A in partnership a new partnership has been created. In the same way, there could be a continuing partnership if D joined the ABC partnership under the same agreement and at the same time as B and C left. In this case there is always more than one partner and the requirement for there to be a member who was a member before the change and remains a member after the change is satisfied. LBTT(S)A 2013 schedule 17 paragraph 5 Partnership not to be regarded as a unit trust scheme For the purpose of LBTT, a partnership is not to be treated as

a unit trust scheme – see LBTT5005; or

an open-ended investment company – see LBTT5006. LBTT(S)A 2013 schedule 17 paragraph 6




LBTT7003 Interpretation

Partnership property A partnership property is an interest or right held by or on behalf of a partnership, or the members of a partnership, for the purposes of the partnership business. Amongst other things this reflects the practice in Scotland that title to partnership property is not held in the name of the firm itself. Section 70 of the Abolition of Feudal Tenure etc. (Scotland) Act 2000 allows Scottish firms to hold title in their own name but the practice of title being otherwise held remains more common e.g. title held in the name of a trust for the firm, or in the name of one of the partners.

LBTT(S)A 2013 schedule 17 paragraph 43 Partnership share Any reference to a person’s partnership share at any time is to the proportion in which the person is entitled at that time to share in the income profits of the partnership. LBTT(S)A 2013 schedule 17 paragraph 44 Transfer of chargeable interest A transfer of a chargeable interest includes:

• the creation of a chargeable interest;

• the renunciation or release of a chargeable interest; and

• the variation of a chargeable interest. LBTT(S)A 2013 schedule 17 paragraph 45 Transfer of chargeable interest to and from a partnership Paragraphs 46 and 47 of schedule 17 to the LBTT(S)A 2013 provide that, in certain circumstances, acquisitions and disposals of chargeable interest can be constituted by how assets are deployed in respect of partnership business. If the assets are deployed for the first time in a partnership business then there is an acquisition by the partnership. The provisions underline the risks of not using assets held by a partnership for the purpose of partnership business. Because the purpose of the Sum of Lower Proportions (SLP) discount is to aid working partnership, the discount may be rejected if assets entering a partnership are clearly not for the purpose of the partnership business, such as an accountancy partnership acquiring riding stables. LBTT(S)A 2013 schedule 17 paragraph 46 LBTT(S)A 2013 schedule 17 paragraph 47










Transfer of interest in a partnership Where a person acquires a partnership share or a person’s partnership share increases there is a transfer of an interest in the partnership (to that partner and from the other partners). LBTT(S)A 2013 schedule 17 paragraph 48 Connected persons Connected persons has the same meaning as it has for section 1122 of the Corporation Tax Act 2010, but subsection 7 (partners connected with each other) is omitted. For the purposes of:

transfers of chargeable interests into a partnership by a partner, someone becoming a partner or someone connected with a partner or someone becoming a partner; or

the sum of the lower proportions calculation (see LBTT7005) for transactions involving transfers of a chargeable interest from a partnership,

section 1122 of the Corporation Tax Act 2010 applies with the omission of subsection (6)(c) to (e). LBTT(S)A 2013 schedule 17 paragraph 49 Arrangements ‘Arrangements’ include any scheme, agreement or understanding, whether or not legally enforceable. LBTT(S)A 2013 schedule 17 paragraph 50








LBTT7004 Ordinary partnership transactions When a partnership acquires a chargeable interest and enters into the land transaction as the buyer, this is called an ‘ordinary partnership transaction’. For example, in the situation where a firm acquires land and later sells it on (neither transaction being linked) there are no specialities of calculation and subject to the below the transaction of treated in the same way as if the firm was a natural person or a company. Responsibility of partners Anything required or authorised to be done by or in relation to the buyer under the transaction is required or authorised to be done by or in relation to all the responsible partners. Subject to the provisions relating to representative partners below, the responsible partners in relation to a transaction are those that are members of the partnership at the time of the effective date of the land transaction, and any partner who joins the partnership after the effective date. LBTT(S)A 2013 schedule 17 paragraph 8 Representative partners A partnership can nominate a representative partner or partners to act on behalf of the responsible partners, for instance in making the declaration that is required on a LBTT return. The nomination of representative partners must be done by a majority of the partners and, to be effective, the nomination (and any subsequent revocation of the nomination) must be notified to us. LBTT(S)A 2013 schedule 17 paragraph 9 Liability of responsible partners Irrespective of any nomination of representative partners, all the responsible partners have joint and several liability for the payment of LBTT. However, the joint and several liability of the partners in respect of the payment of the LBTT does not extend to any person who did not become a responsible partner until after the effective date of the relevant land transaction. LBTT(S)A 2013 schedule 17 paragraph 10 Section 116 (claims for repayment) (see RSTP7003 and RSTP7004) and section 129 (third party information notices) (see RSTP2005) of the RSTPA 2014 also apply to partnerships.











LBTT7005 Transactions involving the transfer of a chargeable interest to a partnership When a chargeable interest is transferred to a partnership by:

a partner;

a person who will become a partner; or

a person connected to either the partner or person who will become a partner,

then the rules in Part 4 of schedule 17 to the LBTT(S)A 2013 apply. A property-investment partnership may elect to disapply the rules of Part 4 however. LBTT(S)A 2013 schedule 17 paragraph 35 The rules apply whether the transfer is in connection with the formation of a partnership or is a transfer to an existing partnership. Certain events following the transfer of a chargeable interest to a partnership are treated as land transactions:

transfer of a partnership interest pursuant to arrangements that were in place at the time of a land transfer – see LBTT7006; and

withdrawal of money etc. from partnership after transfer or chargeable interest

– see LBTT7007.

LBTT(S)A 2013 schedule 17 paragraph 12 Calculating the chargeable consideration The rules include a formula that is used for determining the chargeable consideration in a land transfer involving the transfer of a chargeable interest to a partnership. The objective of the formula is to reduce the LBTT payable on the land transfer to reflect the continuing economic interest in the chargeable interest through being a partner. The formula for calculating the chargeable consideration is as follows:

MV x (100 – SLP)% Where MV is the market value (see LBTT2016) and SLP is the Sum of Lower Proportions. The sum of lower proportions is the ‘retained interest’ of the transferor, and is expressed as a percentage of the ownership retained or treated as retained by the transferor.





To take a simple example, if one partner transfers a chargeable interest that they have 100% ownership over into a partnership of four partners who each have an equal share in the partnership, the partnership will only pay LBTT over the 75% to reflect the partner’s 25% ‘retained interest’. LBTT(S)A 2013 schedule 17 paragraph 13 There is a five step process to determine the sum of lower proportions:

LBTT(S)A 2013 schedule 17 paragraph 14 Step 1 Identify the relevant owner, or relevant owners. A person is a relevant owner if:

immediately before the transaction, they were entitled to a proportion of the chargeable interest; and

immediately after the transaction they were a partner in the partnership or connected to a partner.

For the purposes of determining the sum of lower proportions, any persons who are joint owners of a chargeable interest are treated as common owners in equal shares. This example illustrates how to identify the relevant owners. A plot of land is owned by a husband and wife. The husband has a 50% share and the wife has a 50% share. The land is transferred to a partnership of four partners, the husband is one of the four partners and has a share of 40% in the partnership. The remaining three partners have equal shares of 20%. In this example, the husband is a relevant owner as he has 50% ownership of the land prior to the land transfer and will still be a partner after the land transfer. Despite the fact that the wife is not a member of the partnership, she is a relevant owner as she did have 50% ownership of the land prior to the land transfer and she is a connected person (by virtue of section 1122(5)(a) of the Corporation Tax Act 2010) as regards her husband, and is thus a relevant owner in respect of the partnership by virtue of her husband’s membership of the partnership. LBTT(S)A 2013 schedule 17 paragraph 15 Step 2 Identify the corresponding partner or partners for each relevant owner. The person is a corresponding partner if, immediately after the land transfer, the person:

is a partner; and







the person is the relevant owner or is an individual connected with the relevant owner (if the relevant owner is only connected with a partner that is a company, then there is no corresponding partner).

For the purposes of the second category, a company is treated as a connected person with the relevant owner in so far as the company holds the property as trustee or is connected with the relevant owner by virtue of section 1122(6) of the Corporation Tax Act 2010. To continue with the example, the wife is not a partner and therefore she cannot be a corresponding partner. However, her husband is a partner and a connected person. He is a corresponding partner as he is a partner after the land transfer takes place and is a relevant owner. The other three partners are not corresponding partners, as they are not individuals connected with the relevant owner. It is possible that there is no relevant owner with a corresponding partner, for instance if a person leaves the partnership when the land transfer occurs. If this is the case, the sum of lower proportions is nil and the LBTT is charged on the full market value of the chargeable interest with no discount, as the transferor has not retained their interest in the chargeable interest. LBTT(S)A 2013 schedule 17 paragraph 16 Step 3 Determine the proportion of the entitlement to the chargeable interest being transferred for each relevant owner immediately prior to the land transfer. That proportion should then be apportioned between any one or more of the relevant owner’s corresponding partners. It should be noted that there is discretion as to how this apportionment is done by the taxpayer. To continue with the example, the husband and wife are both relevant owners. Prior to the land transfer, they were each entitled to 50% of the chargeable interest. The husband’s 50% is apportioned only to himself as he is his only corresponding partner. The wife’s 50% proportion is apportioned directly to her husband, who is her only corresponding partner. Therefore 100% can be apportioned to the husband. Step 4 For each corresponding partner find the lower proportion. This is the lower of either:

the sums of the apportioned entitlements found as a result of step 3; or

the partner’s partnership share after the land transfer.

To continue with the example, the husband has 50% from his wife and a further 50%, bringing a total of 100%.





The husband has a 40% partnership income share. Therefore, the lower proportion for the husband is 40%. Step 5 Add together the lower proportions as determined at step 4. To continue with the example, the lower proportion for the husband is 40%. The partnership determines the LBTT due by using the following formula: MV x (100-40) % and so the chargeable consideration (which must be the market value as it is a transfer from a partner to a partnership) payment is discounted by 40% to reflect the husband’s retained interest in the chargeable interest and the fact that he has a 40% share in the partnership and the application of the connected persons test in respect of his wife’s previous 50% share is also taken into account. If the partners each had equal shares, i.e. a 25% share each, the LBTT would be calculated slightly differently. Each partner would have a 25% share, so the husband’s lower proportion would be 25% in this case instead of 40%. Therefore, the Sum of Lower Proportions would amount to 25% in that case. MV x (100-25)% is used for the purposes of determining the chargeable consideration. Moreover, if the chargeable interest was not in joint ownership before it was transferred to the partnership, it would be calculated differently too. For step 1, only the husband would be a relevant owner. For step 2, only the husband would have a corresponding partner, which would be himself. For step 3, the relevant owner/husband was entitled to 100% of the chargeable interest prior to the land transfer. This would be apportioned only to himself. For step 4, for the husband is the only corresponding partner, so the lower of what is apportioned to the corresponding partners or their partnership share is 25%. For step 5, there is only the 25% to add together, so the LBTT is calculated by the following formula: MV x (100 – 25) % This means that the LBTT is discounted by 25% to reflect the retained interest of the partner who brought the chargeable interest to the partnership.


LBTT7006 Transfer of a partnership interest pursuant to arrangements that were in place at the time of a land transfer The following set of rules is an anti-avoidance provision to stop persons understating consideration and then making up the difference to the seller by value shifting partnership shares. The transfer of an interest in a partnership (‘the partnership transfer’) subsequent to a land transfer of a chargeable interest into a partnership is a chargeable land transaction for the purposes of LBTT if the partnership transfer arrangements were in place at the time of the land transfer. The land transfer and the partnership transfer are treated as linked transactions. This provision is in place to prevent the deliberate increasing of a share in a partnership when there is a transfer of land into the partnership. This would decrease the LBTT liability by artificially reducing the partnership shares of the other partners so that the sum of lower proportions arrived at is lower than it is in reality. The chargeable consideration is a proportion of the market value (see LBTT2016), at the date of the partnership transfer, of the interest that was transferred by the land transfer. The proportion is either:

if the party making the partnership transfer is not a partner after the partnership transfer, their share in the partnership before the partnership; or

if the party making the partnership transfer is a partner immediately after the transfer, the difference between that person’s partnership share before and after the partnership transfer.

For instance, a person with 100% ownership of a chargeable interest transfers it to a partnership of three, of which they are a partner. The three partners are equal partners, but in order to mitigate their LBTT liability at the time, the partner who used to own the chargeable interest takes a 90% share in the partnership, and the other two have their share reduced to 5% each. They agree that they will later adjust their partnerships shares back to a third each in six months’ time. When the land transfer occurs, the sum of lower proportions will operate to discount the chargeable consideration to only 10% of the market value because of the 90% share of the partner who is bringing the chargeable interest to the partnership. Six months later, the partners adjust their shares back to a third each. The partnership will require to pay LBTT on the partnership transfer, and the chargeable consideration will be the proportion of the market value of chargeable interest at the time of the land transfer equivalent to the partner who is reducing their share from 90% to 33.3%, so the chargeable consideration will be 56.7% of the market value of the subjects of the land transfer. Any partner who becomes a partner as a consequence of the partnership transfer will become a responsible partner, and those who were partners who were partners


prior to the transfer and remain partners after the transfer are also responsible partners.


LBTT7007 Withdrawal of money etc. from partnership after transfer of chargeable interest The following set of rules about withdrawal of money is an anti-avoidance provision charging on the withdrawal of money which is linked to a previous land transaction. Where certain ‘qualifying events’ occur within three years of a land transfer, they are treated as a land transaction and as a chargeable transaction for the purposes of LBTT. The following are qualifying events:

withdrawal from the partnership of money or money’s worth (that is not income profit) by the relevant person of capital from the partner’s capital account, in such a case the chargeable consideration shall be taken to be the value of the money or money’s worth withdrawn from the partnership;

a withdrawal that reduces a person’s interest;

a withdrawal that comes about as the result of a person ceasing to be a partner;

where a relevant person has made a loan to a partnership, the repayment of any part of that loan. The chargeable consideration will be taken to be equal to the amount repaid by the partnership; and

where a relevant person has made a loan to the partnership, a withdrawal from the partnership of money or money’s worth that does not represent income profit. The chargeable consideration in this case will be the value of the money or money’s worth so far as it does not exceed the amount of the loan made.

The relevant person is an existing partner who transfers a chargeable interest to a partnership, or a person who transfers a chargeable interest to a partnership in exchange for a share in the partnership, or a person who is connected to the existing partner or incoming partner. Any chargeable consideration should not exceed the market value (see LBTT2016) of the chargeable interest at the effective date of the land transfer and should be reduced by any amount that was previously chargeable to tax. The amount of tax payable (if any) in respect of the qualifying event is to be reduced (but not below nil), where applicable, by the amount of tax payable resulting from the transfer of an interest in a property investment partnership (see LBTT7011). LBTT(S)A 2013 schedule 17 paragraph 18



LBTT7008 Transactions involving the transfer of a chargeable interest from a partnership to a person who is or was a partner, or is connected with such a person Where a chargeable interest is transferred from a partnership to a person who is or has been one of the partners, or is a person connected with such a person, then LBTT will apply to the transfer. In other words, this applies where an interest in land is effectively going out of the partnership (the opposite of LBTT7005 which concerns an interest going into a partnership). For guidance on transfers from a partnership to another partnership see LBTT7009. LBTT(S)A 2013 schedule 17 paragraph 20 As with the transfer of a chargeable interest to a partnership, the objective is to reduce the LBTT liability by a proportion to reflect the person’s prior economic interest in the chargeable interest when it was held by the partnership. The same formula applies: MV x (100 – SLP)% Where MV is the market value (see LBTT2016) and SLP is the Sum of Lower Proportions. LBTT(S)A 2013 schedule 17 paragraph 21 The SLP in relation to the land transfer is determined in the following five steps. LBTT(S)A 2013 schedule 17 paragraph 22 Step 1 Identify the relevant owner, or relevant owners. A relevant owner is a person who:

is entitled to a proportion of the chargeable interest immediately after the land transfer; and

was a partner or connected to a partner immediately before the land transfer. For the purposes of determining the sum of lower proportions, any persons who are joint owners of a chargeable interest are treated as common owners in equal shares For example, a farming partnership of four partners own a 400 acre farm. One of the partners wishes to leave the partnership, and is taking 100 acres of land that she owns out of the partnership. The exiting partner is a relevant owner. LBTT(S)A 2013 schedule 17 paragraph 23






Step 2 Identify the corresponding partner or partners for each relevant owner. The person is a corresponding partner if, immediately before the land transfer, the person:

was a partner; and

was the relevant owner or was an individual connected with the relevant owner.

For the purposes of the second category, a company is treated as a connected person with the relevant owner in so far as the company holds the property as trustee or is connected with the relevant owner only by virtue of section 1122(6) of the Corporation Tax Act 2010. To continue with the example, the exiting partner is also their own corresponding partner. It is possible that a relevant owner does not have a corresponding partner (other than the relevant owner). LBTT(S)A 2013 schedule 17 paragraph 24 Step 3 Determine the proportion of the entitlement to the chargeable interest being transferred for each relevant owner immediately after the land transfer. That proportion should then be apportioned between each relevant owner’s corresponding partners. It should be noted that there is discretion as to how the apportionment is done by the tax payer. To continue with the example, the exiting partner will have 100% of the chargeable interest. They will apportion the 100% only to themselves as corresponding partner. Step 4 For each corresponding partner find the lower proportions. This is the lowest of either:

the apportioned entitlement found as a result of step 3; or

the partnership share attributable to the partner prior to the land transfer (see below).

To continue with the example, the exiting partner has 100% of apportioned entitlement and had a 25% share in the partnership so the lowest proportion is 25%. Step 5 Add together the lower proportions as determined at step 4.





To continue with the example, the exiting partner is the only party with a lower proportion that needs to be added, so the total of the lower proportions is 25%. The LBTT liability is found by inserting the sum of the lower proportions into the following formula: MV x (100 – 25)% and so the LBTT payment is reduced by 25% and this reflects the exiting partner’s prior 25% share in the partnership. There are special rules that apply for determining the partnership share attributable to the partner in step 4, for the purpose of working out the sum of lower proportions, where the land transaction involves a chargeable interest going out of a partnership. LBTT(S)A 2013 schedule 17 paragraph 25 In order to benefit from the LBTT discount that arises as a result of the sum of lower proportions, the exiting partner must still be a member of the partnership at the effective date on which the land transaction occurs. If they have left the partnership, then the partnership share attributable to that partner is zero, and there will be no LBTT discount as a result. Where the exiting partner is a member of the partnership up until the land transfer in which the chargeable interest in question ceases to be partnership property, the following steps should be taken: Step 1 Find the exiting partner’s share in the partnership on the ‘relevant date’ which is either the effective date of the transfer of the chargeable interest to the partnership, or, if the partner did not join the partnership until after that effective date, the date on which they joined the partnership. Step 2 Add to that partnership share any increase in the partner’s share that occurs after the relevant date and immediately before the effective date. It should be noted that the increase in partnership share can only be used for the purpose of determining the partnership share attributable to the partner if LBTT was paid on the land transfer that took place when they acquired the increased partnership share. Step 3 Deduct from the increase in the partnership share any decreases in the partnership share that have occurred between the relevant date and the land transfer. The result is the partnership share attributable to the partner. If this result is below zero the partnership share attributable to the partner is zero. A worked example illustrating the above is provided separately on our website under

‘LBTT Worked Examples’.




LBTT7009 When a chargeable interest is transferred between partnerships When there is a transfer of a chargeable interest from a partnership and it is being transferred to another partnership, the transfer is not one in which both Part 4 and Part 5 of schedule 17 to the LBTT(S)A 2013 apply. If that were the case, there could in fact end up being two LBTT charges. Instead, the taxpayer should calculate the LBTT that would be applicable if Part 4 applied, and the LBTT that would be applicable if Part 5 applied. The LBTT charged is based on the larger of the two chargeable considerations. LBTT(S)A 2013 schedule 17 paragraph 27 When a chargeable interest is transferred from a partnership that consists wholly of bodies corporate If all the partners in a partnership are bodies corporate and the sum of lower proportions arrived at is 75 or more, the chargeable consideration for the land transfer is the market value of the interest that is transferred. It is possible that group relief (see LBTT3025) may be able to be claimed. However, if any of the chargeable consideration includes rent, then the chargeable consideration is the Net Present Value of the rent over the term of the lease as well as the market value of the lease. LBTT(S)A 2013 schedule 17 paragraph 28






LBTT7010 Transfers involving leases Part 6 of schedule 17 to the LBTT(S)A 2013 makes provision for transactions involving the transfer of a chargeable interest into a partnership, or a transfer of a chargeable interest out of a partnership, in which the chargeable consideration is rent. This will involve a partnership entering a lease as tenant, or a partnership granting a lease to a partner. In such cases, the chargeable consideration is reduced to reflect the partnership shares and interests of the partners involved in the lease, and the calculation of the chargeable consideration in paragraph 4 of schedule 19 is modified to reflect that the partners involved may have had interests in the subjects of the lease prior to the lease being granted. Chargeable consideration involving rent LBTT is charged on:

a proportion of the Net Present Value (NPV) of the rent; and

a proportion of any consideration other than rent and market value of the lease.

The NPV of the rent over the term of the lease is determined as usual. Of this amount, the relevant chargeable proportion is chargeable, determined as: (100 – SLP)% Where SLP is the sum of the lower proportions. Chargeable consideration other than rent i.e. a premium Where there is consideration other than rent i.e. a premium, the chargeable consideration also includes consideration given by the formula: (RCP x MV) + (RCP x AC) Where:

RCP is the relevant chargeable proportion;

MV is the market value of the interest transferred (see LBTT2016); and

AC is the actual chargeable consideration other than rent.



If there is no chargeable consideration other than rent, there shall be taken to be chargeable consideration other than rent and it shall be taken to be: RCP x MV Where:

RCP is the relevant chargeable proportion; and

MV is the market value of the interest transferred. This means that, whether or not consideration other than rent has been paid for a lease, the market value of that lease has to be determined, that is, the premium which would be payable if that lease were granted in the open market. Relevant chargeable proportion The relevant chargeable proportion of the market value is given by the formula: (100 – SLP)% The relevant chargeable proportion of the actual consideration other than rent is SLP%, where SLP is the sum of the lower proportions. The total of these two proportions will always be 100%. Transfer of a lease from a partnership where both partners are bodies corporate Where a lease is transferred from a partnership that is a body corporate to another body corporate that is or has been a partner, and the SLP is 75 or more, then the chargeable consideration is taken to be the market value of the interest transferred. LBTT(S)A 2013 schedule 17 paragraph 29



LBTT7011 Property investment partnerships A property investment partnership (PIP) is a partnership whose sole or main activity is investing or dealing in chargeable interests. The partnership does not need to be conducting construction operations (as defined by section 74 of the Finance Act 2004) in order to be considered as a property investment partnership for the purposes of LBTT. The provisions about PIPs in Part 7 of schedule 17 to the LBTT(S)A 2013 concern a very narrow class of partnerships, namely those whose sole or main activity is investing in or dealing in property. In other words they are firms speculating in property rather than house building firms. Given that the assets of the firm are chargeable interests, there is potentially scope for avoidance by using the partnership as a vehicle for movements of property, with transfer of ownership of property avoiding tax by being represented only by the transfer of the holding partnership shares. Accordingly, the shares in the partnership transferred are taxed based on the market value pro rata of underlying chargeable assets. A similar approach is available in section 47 of the LBTT(S)A 2013 for the Scottish Ministers to make regulations in respect of residential property holding companies. LBTT(S)A 2013 schedule 17 paragraph 31 The PIP can hold interests in land that would be chargeable interests but for the fact that land is outwith Scotland, and still fall within the definition of property investment partnership. Where the relevant partnership property includes a chargeable interest, a transfer of an interest in a PIP is treated as a chargeable land transaction for the purposes of LBTT. The buyer in the land transaction is either the partner who increases their partnership share as a result of the transfer, or a person who joins the partnership. The chargeable consideration for the purposes of LBTT is equal to a proportion of the market value of relevant partnership property which is:

for a person acquiring an interest in the partnership for the first time, their

share in the partnership just after the transfer; or

if the person acquiring an interest in the partnership is already a partner, the

difference between the partnership share before and after the transfer.

There are two different forms of transfer of an interest in a partnership: Type A and Type B. A Type A transfer is a transfer which takes the form of arrangements entered into under which:







the whole or part of a partner’s interest is acquired by another partner, or a

another person, and money or money’s worth is given by the partner or

person acquiring the interest; or

a person becomes a partner, and the interest of an existing partner is

reduced, or they leave the partnership, and there is a withdrawal of money or

money’s worth by the existing partner of money or money’s worth that was not

available to the partnership prior to the transfer.

Any other form of transfer is a Type B transfer. For a Type A transfer, relevant partnership property includes all chargeable interests held by a partnership immediately after the transfer with the exception of:

chargeable interests transferred to the partnership as part of the transaction;

market rent leases; and

any other chargeable interest that is not attributable economically to the

interest in the partnership that is being transferred.

For a Type B transfer, relevant partnership property includes all chargeable interests held by a partnership immediately after the transfer with the exception of:

chargeable interests transferred to the partnership as part of the transaction;

market rent leases;

any other chargeable interest that is not attributable economically to the

interest in the partnership that is being transferred;

any transfer of a chargeable interest where the buyer has elected to disapply

the rules relating to the transfer of a chargeable interest to a partnership; and

any transfer of a chargeable interest that was not made by a partner, someone becoming a partner or a person connected with a partner.

The transfer of an interest in a property investment partnership is treated as a chargeable interest for the purposes of the withdrawal of group relief. LBTT(S)A 2013 schedule 17 paragraph 35



Market rent leases A lease held as partnership property immediately after a transfer of an interest in the partnership is not relevant partnership property for either a Type A or a Type B transfer if the following four conditions are met: The first condition is that:

no chargeable consideration other than rent has been given in respect of the grant of the lease; and

no arrangements are in place at the time of the transfer for any chargeable consideration other than rent to be given in respect of the grant of the lease.

The second condition is that the rent payable under the lease as granted was a market rent at the time of the grant. The third condition is that:

the term of the lease is five years or less; or

if the term of the lease is more than five years:

o the lease provides for the rent payable under it to be reviewed at least once in every five years of the term; and

o the rent payable under the lease as a result of a review is required to be a market rent at the review date.

The fourth condition is that there has been no change to the lease since it was granted which would have the effect of making the rent payable under the lease less than a market rent. The market rent of a lease at any time is the rent which the lease might reasonably be expected to fetch at that time in the open market. A review date is a date from which the rent determined as a result of a rent review is payable. LBTT(S)A 2013 schedule 17 paragraph 33 Exchanges of partnership interests Where a partner acquires an interest in a partnership and the consideration for that interest is the transfer of land to an existing partner (as distinct from the partnership), the interest in the partnership shall be treated as a major interest in land if the relevant partnership property includes a major interest in land. The usual rules in relation to exchanges apply (see LBTT5002), with the exception of the rules about the division or partition of a chargeable interest.



LBTT(S)A 2013 schedule 17 paragraph 34 Election by a PIP to disapply Part 4 rules In a transfer of a chargeable interest to a PIP, the buyer can elect for the rules in relation to transfers of a chargeable interest to a partnership (see LBTT7005) not to apply. If an election is made, the rules in relation to transfers of a chargeable interest from a partnership (see LBTT7008), are also disapplied. Where an election is made, the chargeable consideration is taken to be the market value of the chargeable interest and the transaction is treated as an ordinary partnership transaction (see LBTT7004). An election under this paragraph must be included in the LBTT return made in respect of the transaction or in an amendment of that return. Such an election is irrevocable and a LBTT return may not be amended so as to withdraw the election. Where an election under this paragraph in respect of a transaction (the ‘main transaction’) is made in an amendment of a LBTT return:

the election has effect as if it had been made on the date on which the LBTT return was made; and

any LBTT return in respect of an affected transaction may be amended (within the period allowed for amendment of that return) to take account of that election.

‘Affected transaction’, in relation to the main transaction, means a PIP transaction with an effective date on or after the effective date of the main transaction. LBTT(S)A 2013 schedule 17 paragraph 35




LBTT7012 Exemptions, reliefs and notification No exemption where there is no chargeable consideration The exemption from tax where there is no chargeable consideration does not apply to:

transactions involving the transfer of a chargeable interest to a partnership - see LBTT7005;

transactions involving the transfer of a chargeable interest from a partnership – see LBTT7008;

transfers of a partnership interest pursuant to arrangements that were in place at the time of a land transfer – see LBTT7006; or

a transfer of an interest in a property investment partnership – see LBTT7011.

There are certain rules (below) in relation to the application of group relief (see LBTT3025) and charities relief (see LBTT3035) to transactions involving partnerships, but otherwise, any other provision affording exemption or relief from LBTT applies. LBTT(S)A 2013 schedule 17 paragraph 37 Application of group relief Group relief (see LBTT3025) is available in transactions involving partnerships where the conditions for it are met. The primary requirement of group relief is whether the companies concerned are within a group structure and this depends upon the status of the companies involved: they must be bodies corporate and, to establish a group structure, they must have issued share capital. The status of a partnership for group relief purposes depends on the nature of that partnership. Scottish Partnerships and Scottish Limited Partnerships are not bodies corporate and therefore cannot be members of an LBTT group. They do have legal personality and can own shares in a subsidiary. This means a Scottish Partnership causes a break in the group structure. Limited Liability Partnerships (wherever registered in the UK) are also bodies corporate – see the Limited Liability Partnership Act 2000. English Partnerships and English Limited Partnerships have no legal personality. Whilst the status of the partnership is relevant for group relief, it is not for partnership rules, as liability to LBTT is that of the partners, not the partnership.




Where there is a transfer of a chargeable interest to or from a partnership, LBTT(S)A 2013 ‘looks through the partnership’ to the partners. When looking at transfers to or from group companies where there is a partnership in the group structure the type of partnership determines whether the provisions of group relief can apply. The provisions in relation to withdrawal of group relief (see LBTT3026) are modified for the purposes of partnerships transactions. Group relief is withdrawn where a partner who was a partner at the effective date of the transaction which is exempt from charge by virtue of this schedule (‘the relevant partner’ and ‘the relevant transaction’ respectively) ceases to be a member of the same group as the seller before the end of the period of three years beginning with the effective date of the transaction, or in pursuance of, or in connection with, arrangements made before the end of that period. References to the ‘buyer’ in the rules for group relief are to be read as references to the relevant partner. Where group relief is partially withdrawn, the amount of tax chargeable is an appropriate proportion having regard to the subject matter of the relevant transaction and what is held at the relevant time by or on behalf of the partnership and to the proportion in which the relevant partner is entitled at the relevant time to share in the income profits of the partnership. LBTT(S)A 2013 schedule 17 paragraphs 38-39 Where, in calculating the sum of the lower proportions for a transaction involving the transfer of a chargeable interest to a partnership, and a company (‘the connected company’) would have been a corresponding partner of a relevant owner (‘the original owner’) but for the fact that the definition of corresponding partners includes connected persons only if they are individuals, and the connected company and the original owner are members of the same group, then the charge in respect of the transaction is to be reduced to the amount that would have been payable had the connected company been a corresponding partner of the original owner for the purposes of calculating the sum of the lower proportions. The rules for withdrawal and partial withdrawal of group relief apply in the same way to the partner and the transferor who was a member of the same group at the time of the transaction. Again, references to the ‘buyer’ in the rules for group relief are to be read as references to the relevant partner. LBTT(S)A 2013 schedule 17 paragraph 39 Application of charities relief Where the conditions for charities relief (see LBTT3035) are met the relief applies to all partnership transactions. However, this is modified where the transaction is a




transfer of an interest in a property investment partnership or a transfer of a partnership interest pursuant to earlier arrangements. Charities relief is available in these circumstances if the transferee is a charity and every chargeable interest held as partnership property immediately after the transfer must be held for qualifying charitable purposes. LBTT(S)A 2013 schedule 17 paragraph 40 A worked example on the application of charities relief to partnership transactions is provided separately on our website under ‘LBTT Worked Examples’. Notification of transfers of partnerships interests A transaction which is a chargeable transaction because it is either:

a transfer of an interest in a property-investment partnership and the relevant partnership property includes a chargeable interest; or

a transfer of a partnership interest pursuant to arrangements that were in place at the time of a land transfer,

is a notifiable transaction if (but only if) the consideration for the transaction exceeds the nil rate band. The consideration for a transaction exceeds the nil rate band if either of the following conditions are met:

the chargeable consideration; or

where the transaction is one of a number of linked transactions, the total chargeable consideration for all the linked transactions,

exceeds the nil rate band applicable to the transaction. LBTT(S)A 2013 schedule 17 paragraph 41





LBTT8001 Trusts

This chapter of guidance mainly relates to the provisions contained in schedule 18 to the LBTT(S)A 2013 and sets out the responsibilities of trustees and how LBTT applies in relation to interests in trusts and to the acquisition of a chargeable interest through the exercise of a power of appointment or discretion.


The responsibilities of the trustee and beneficiaries in LBTT depend on the kind of trust in which the land is held.

There are two basic types of trust for the purposes of LBTT:

Bare trusts – LBTT8002; and

Settlements – LBTT8003.

If the trust property includes land in Scotland, the acquisition of a beneficiary’s interest in the trust is the acquisition of a chargeable interest and constitutes a land transaction for LBTT purposes. LBTT(S)A 2013 schedule 18 paragraph 4






LBTT8002 Bare trusts A bare trust is a trust in which property is held by a person as trustee for:

a person who is ‘absolutely entitled’ against the bare trustee, or who would be

so entitled but for being a minor or having some other legal disability;

two or more persons who are or would be jointly so entitled; or

a person who has nominated a bare trustee to act for them for reasons

including anonymity.

A worked example of a bare trust is provided separately on our website under ‘LBTT

Worked Examples’.


A person is ‘absolutely entitled’ against the bare trustee if they have the right against

the trustee to acquire the trust property from the trustee, and if the beneficiary has

the right to direct how the trust property is to be dealt with. No consent of the trustee

is required for the beneficiary to acquire the trust property.


Acquisition of a chargeable interest by a bare trustee

Where a party acquires a chargeable interest or an interest in a partnership as a

bare trustee, LBTT applies as if the chargeable interest was acquired by the

beneficiaries of the trust. Therefore anything that the bare trustee does in relation to

the chargeable interest is regarded for the purposes of LBTT, as an action by the

beneficiaries. Any LBTT due may be recovered from the bare trustee. Different

rules apply in relation to leases, as follows.

LBTT(S)A 2013 schedule 18 paragraphs 5-7

Grant of a lease to bare trustee

Where a lease is granted to a person acting as a bare trustee, the bare trustee is

treated as the buyer of the whole interest acquired and so will be liable to make

LBTT payments and returns in respect of the lease.









Grant of a lease by bare trustee

Where a person acting as a bare trustee grants a lease, the person is treated as the seller of the whole interest disposed of. LBTT(S)A 2013 schedule 18 paragraph 9 Direction from the beneficiary in a bare trust to transfer their interest to another party as beneficiary

The transfer from a beneficiary to another person, whether already a beneficiary or

otherwise as a beneficiary, is the transfer of a chargeable interest for LBTT

purposes.

Direction from the beneficiary in a bare trust to bare trustee to dispose of the trust property The transfer of a chargeable interest from the bare trust to a third party on the open

market is treated as a land transaction for LBTT purposes.

LBTT(S)A 2013 schedule 18 Part 3




LBTT8003 Settlements A settlement is any trust arrangement that is not a bare trust. Typical examples of

settlement trusts include:

interest in possession trusts – where the beneficiary has entitlement to the

income of a trust. Trusts with an income interest, now commonly called

income in possession trusts (although that is not a Scottish legal term), give

the beneficiary the income from invested assets or, in the case of widows,

often traditionally the right to occupy land or a house and enjoy any income

from it; in which case the person was known as the life-renter or life-rentix.

Sometimes this was for a shorter period such as to the age of majority or

came to an end on an event like marriage. Such a beneficiary generally has

no entitlement to the capital of the trust;

discretionary trusts – where the trustees have discretion about how to use the

capital and income of the trust; and

other types of trust that are settlement trusts for the purposes of LBTT include

trusts for accumulation and trusts for maintenance and mixed trusts that are

combinations of types of trusts or are set up in foreign jurisdictions.

A worked example of a settlement trust is provided separately on our website under ‘LBTT Worked Examples’. Acquisition by trustees of settlements The LBTT(S)A 2013 applies to the trustees of a settlement trust. When the trust acquires a chargeable interest the trustees are treated as buyers of the whole interest. LBTT(S)A 2013 schedule 18 paragraph 10 Where the chargeable interest is acquired by the exercise of a power of appointment or the exercise of a discretion vested in trustees, any consideration paid to the trustees in exchange for the exercise of their power of appointment or discretion vested in them, so that the chargeable interest passes from a settlement trust to a beneficiary, is treated as consideration for the acquisition of the chargeable interest. In these circumstances, therefore, there is a land transaction for LBTT purposes. LBTT(S)A 2013 schedule 18 paragraphs 11-12





Re-allocation of trust property as between beneficiaries

When a trust property is re-allocated and the beneficiary acquires an interest in

different trust property and loses their interest in the chargeable interest with the

beneficiary’s consent, the consent of the beneficiary does not constitute chargeable

consideration. Therefore, there is a land transaction but it is an exempt interest as

there is no consideration paid, no tax is payable and no LBTT return is required.

LBTT(S)A 2013 schedule 18 paragraphs 13-14

Liability to pay the tax, make a return and make a declaration Where the trustees of a settlement are liable to pay tax, the payment may be recovered (but only once) from any one or more of the responsible trustees. The LBTT return can be made by one or more of the trustees and all the relevant trustees must make the declaration as if they were buyers of the chargeable interest. The ‘responsible trustees’ for LBTT purposes are those who were trustees at the effective date of the land transaction and any party who later becomes a trustee. Scottish land can be made the subject of a trust under English law, with the beneficiary having an equitable right in the Scottish land. For the purposes of the LBTT(S)A 2013 such a right will count as an interest in the Scottish land for the purposes of section 4(2)(a) of the LBTT(S)A 2013 and as a major interest and hence an assignation of such a right will be a land transaction. Paragraph 2 of schedule 18 to the LBTT(S)A 2013 goes further and prescribes that where property (including by implication land in Scotland) is held under the law of Scotland or any country outwith the UK on trust on such terms that if it were so held under English law, the beneficiary would have a beneficial interest, it is to be so treated for the purposes of the LBTT(S)A 2013 even if such a right is not recognised under the laws of Scotland or these other countries. It will depend on the legal systems of the countries not covered by English law but, where possible, English law is to be applied by analogy and its effects copied in Scotland so that LBTT is chargeable as it would be where there is an English trust with an equitable interest held by the beneficiary in land in Scotland, and the equitable interest is assigned. LBTT(S)A 2013 schedule 18 Part 5






LBTT9001 Keeping and preserving records

This chapter of guidance covers the requirement to keep and preserve certain types of records for LBTT purposes, and is structured as follows:

What records must be kept and preserved – LBTT9002

Length of time to keep and preserve records – LBTT9003

Preserving and producing records – LBTT9004


LBTT9002 What records must be kept and preserved A person is required to keep records in relation to any land transaction. In connection with LBTT, a person required to make a LBTT return to us is required by section 74 of the RSTPA 2014 to keep and preserve such records as may be needed to be able to make a correct and complete return, including:

relevant instruments relating to the transaction, in particular any contract e.g.

missives or conveyance e.g. disposition, and any supporting maps, plans or

similar documents; and

records of relevant payments, receipts and financial arrangements.

The person must be able to demonstrate, from the records kept, that the amount of tax due declared on the LBTT return is the correct tax liability. A person who is a buyer in a land transaction which is not notifiable is required by The Revenue Scotland and Tax Powers Act (Record Keeping) Regulations 2015 (Note: This is currently draft legislation) (made under section 81 of the RSTPA 2014) to keep and preserve the same type of records that a person who makes a LBTT return is required to keep and preserve.






LBTT9003 Length of time to keep and preserve records Records relating to a LBTT return A person who makes a LBTT return to us must keep and preserve the records specified under LBTT9002 until the end of the later of A or B:- A) The relevant day, which means:

the fifth anniversary of the day on which the LBTT return is made or, if the return is amended within the 12 month period allowed, the fifth anniversary of the day notice of the amendment is given under section 83 of the RSTPA 2014; or

any earlier day as may be specified by us. B) The date on which:

an enquiry into the LBTT return is completed; or

if there is no enquiry, when we no longer have the power to enquire into the return.

In the case of records required to be kept and preserved by a buyer for a land transaction which is not notifiable, the same time limits apply with the slight variation that the first bullet point at A) is replaced with ‘the fifth anniversary of the day by which the return would have been required to have been made, had the land transaction been notifiable’. A person who fails to keep and preserve records as required under section 74 of the RSTPA 2014 is liable to a penalty under section 76 of that Act (see RSTP3002). Records relating to claims not in a LBTT return A shorter time period applies where a person makes a claim, other than in a LBTT return or amendment to a return, under section 107 of the RSTPA 2014. In this case the person must keep and preserve such records as may be needed to make a correct and complete claim until the latest of:

A) the end of the period of three years beginning with the day on which the claim was made; B) where there is an enquiry into the claim, or into an amendment of the claim, the time when the enquiry is completed; or C) where the claim is amended and there is no enquiry into the amendment, the time when we no longer have the power to enquire into the amendment.









If you fail to keep and preserve records as required above under paragraph 3 of schedule 3 to the RSTPA 2014 then you are liable to a penalty under paragraph 5 of that schedule (see RSTP3002).







LBTT9004 Preserving and producing records

A person required to preserve records in relation to a LBTT return or non-notifiable transaction can fulfil this obligation by:

retaining the original documents; or

preserving the information contained in the original documents

As long as records meet the requirements specified in legislation, a person can preserve them in whatever format - paper and/or electronic - they prefer, including but not limited to:

computer hard drive;

tablet or smartphone;

magnetic tape;

flash drive or memory stick; and

optical media such as a CD, DVD or Blu-Ray.

Whatever format is decided on, records required to be kept and preserved must be easily accessible to us if we request to see the documents.

If records are kept on a computer and it is later upgraded to a new computer system which is not compatible with the old system, records held on the old system must remain accessible for the time periods specified in LBTT9003. If this is not possible, paper copies of these documents must be kept.

If a person preserves the information contained in paper records on computer by transferring the information into an electronic form the method of storage used must be capable of:

capturing all the information needed to make a correct and complete LBTT return; and

reproducing that information in a legible form.

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