The new Land and Buildings Transaction Tax (LBTT) will come into effect on 1 April 2015, replacing SDLT (stamp duty land tax). LBTT will be collected and administered by the newly-created Revenue Scotland.
Following two public consultations, the Scottish Government has announced this month certain important exemptions and reliefs from LBTT, the main ones being as follows:
Licences to occupy: although the Land and Buildings Transaction Tax (Scotland) Act 2013 (the "LBTT Act") did not provide for licences to occupy commercial property being exempt from LBTT, the Scottish Government has now agreed to such an exemption. Unlike in England, licences to occupy do not exist under Scots law, and such arrangements are deemed to be short-term leases. The Scottish Government envisages that the type of short-term lease which would be exempt from LBTT would be shop units within airports, and shops within shops, such as concessions within supermarkets or department stores.
Sub-sales: the LBTT Act did not provide for relief from sub-sales, which relief is available under the SDLT regime (albeit that the scope for claiming such relief has been limited in recent years). Following the second of the two public consultations referred to above, the Scottish Government has now agreed to allow purchasers to claim and receive relief from LBTT on the initial purchase of property within a sub-sale transaction. Thereafter, if significant development does not take place on the property being acquired, the relief may be fully or partially clawed back by Revenue Scotland. The draft regulations being put before the Scottish Parliament envisage a period of five years within which significant development must take place on the acquired property to avoid clawback of sub-sale relief. In terms of cash-flow, this system is more beneficial to parties to a sub-sale than is the case under the SDLT regime, where sub-sale relief claims may only be made after tax has been paid by the ultimate purchaser under the sub-sale.
Multiple dwellings: the LBTT Act provides for relief from LBTT in relation to purchases of multiple dwellings, in order that a single transaction relating to a number of dwellings is not taxed at a high rate when the individual dwellings involved are each at a consideration falling within lower tax bands. The Scottish Government has indicated that the relief will be structured so that the purchaser would only be liable to pay a minimum prescribed proportion of the LBTT which would have been payable had the relief not applied. This proportion has been set at 25%, but the full regulations have yet to be published, and so the details of this relief are not yet fully available. It is not yet known when the regulations will be published.
Acquisition relief: the LBTT Act states that acquisition relief applies where a transaction is entered into by a company in connection with the transfer of all or part of the undertaking of another company where the consideration is non-redeemable shares, and where certain qualifying conditions are met. The Scottish Government has indicated that the tax chargeable is 12.5% of the tax payable in the absence of any relief.
Deferred payment: as well as the reliefs and exemptions outlined above, the Scottish Government has confirmed that the present provisions, allowing a purchaser to defer payment of SDLT, will be broadly replicated under the new LBTT regime.
For more information on The new Land and Buildings Transaction Tax or anything else mentioned above please get in contact with our Head of Real Estate & Construction sector team John Meehan ([email protected] or 0141 227 9622) or Paul Greenhill.