UK: Five Checks For Scottish Property Deals Ahead Of LBTT

Last Updated: 2 April 2015
Article by John Macintosh

April is historically an important month for legislative changes, with a raft of new rules and regulations introduced. This year is no different, and will herald the introduction of a big change to the Scottish real estate market: the Land and Buildings Transaction Tax (LBTT). Replacing Stamp Duty Land Tax (SDLT), it will affect all transactions involving the purchase of, and granting of leases over, Scottish property.

Much has been done by the Scottish Government and Revenue Scotland, the new devolved tax authority, to ensure smooth transition from SDLT to LBTT. But, it won't simply be a case of turning one tax off and flicking the switch on the other.

Taxpayers conducting real estate business in the next few months need to be aware of the special transitional rules that may apply to deals already struck, or leases granted, under SDLT.

Here are five things to look out for when checking if the new rules will affect your transaction:

Timing

Generally speaking, any Scottish property acquired, or any commercial leases entered into, on or after April 1 will be taxed under LBTT rather than SDLT.  So even if you have already exchanged contracts, but complete after April 1, the purchase will be subject to LBTT.

That being said, some Scottish deals will still be subject to SDLT, although this is not expected to apply to many transactions.  In the majority of cases, this will be where missives or contracts were concluded on or before May 1 2012 – when the Scotland Act received Royal Assent – and the contract has not been subsequently changed.

Anglo-Scottish deals

Many property deals, particularly large ones, will involve land located across the UK. To date they have been subject to one tax, but now purchasers will need to consider the additional, separate tax in Scotland.

In cases where a single deal is completing on or after the switch-over date, real estate located in Scotland and England will be subject to LBTT and SDLT, respectively. In addition, neither property will be "linked" with the other for the purposes of each tax's rule and any further compliance obligations of the purchaser will need to be satisfied under both taxes.

Differences

It's worth noting some important differences between the two tax regimes. Firstly, the time limits for filing a return and paying LBTT are different than those under SDLT.

Secondly, and perhaps most importantly, under LBTT registration of title will become more closely linked to the filing of a return and payment of tax. Purchasers will, therefore, need to ensure they have upfront funds for timely registration and to avoid incurring penalties and interest.

Equally, there are variations in the tax bandings – the principal difference being that higher value property will become more expensive under the Scottish regime. At the same time, the increase in the 0% rate should provide some help to first time buyers and those buying homes under the £325,000 threshold.

Residential property

Purchase price

LBTT rate (slice basis)

Purchase price

SDLT rate (slice basis)

Up to £145k

0%

Up to £125k

0%

Above £145k to £250k

2%

Above £125k to £250k

2%

Above £250k to £325k

5%

Above £250k to £925k

5%

Above £325k to £750k

10%

Above £925k to £1.5m

10%

Over £750k

12%

Over £1.5m

12%

 

Non-residential or mixed property

Purchase price

LBTT rate (slice basis)

Purchase price

SDLT rate (slab basis)

Up to £150k

0%

Up to £150k

0%

Above £150k to £350k

3%

Above £150k to £250k

1%

Above £350k

4.5%

Above £250k to £500k

3%

 

 

Above £500k

4.5%

Leases

Lessees of commercial property will be subject to LBTT much in the same way that they were SDLT, albeit any premium is likely to result in a 0.5% higher charge. However, they will also need to file a return every three years in order to "true up" the LBTT paid from when the transaction took place, based on the estimated rent. Although this is an additional burden, it should mean that they are taxed at a rate more closely aligned with the actual rent paid.

As for holdover leases, indefinite leases, assignations and other types of lease transactions, whether or not they are subject to SDLT or LBTT will depend on their particular circumstances. In some cases, relief may be available to take account of the fact SDLT has already been paid. 

Relief

There are a number of reliefs for SDLT, in some instances these can bring the tax due down to 0%. However, it's worth bearing in mind that some of these are subject to withdrawal or claw back. Tax relief most commonly occurs in cases involving companies within a corporate group, purchases by charities, subsales, sale and leasebacks and property acquired under a scheme of reconstruction.  

If relief was claimed under SDLT on a transaction involving land in Scotland, it could still be withdrawn if a disqualifying event occurs on or after the switch-off date. Any new Scottish transactions entered into may be subject to similar relief under LBTT, provided the relevant conditions are met.

While there are many parallels between LBTT and SDLT, the technical application of these rules can be tricky. That's potentially made more complicated by special arrangements which could apply to transactions caught within the switchover period.

LBTT is a self-assessed tax, so it's of the utmost importance that taxpayers are aware of their obligations. If you are planning to acquire Scottish real estate in the near future, or are currently leasing property in Scotland, do get in touch to discuss the potential implications.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions