Transfers between corporate bodies within the same corporate group qualify for 100% LBTT relief, in certain circumstances. To qualify, the seller or purchaser involved needs to be a 75% (or more) subsidiary of the other, or both companies must be 75% (or more) subsidiaries of a third company. There are, however, detailed exceptions to this general rule, set out in the legislation, including in relation to groups involving limited liability partnerships. If you are claiming group relief on a sale or lease entered into between group companies, it is important to remember that group relief will be withdrawn under certain circumstances, including where the buyer/tenant and seller/landlord companies cease to be in the same corporate group within 3 years of the effective date of the transaction. This will also be the case if the companies cease to be in the same group as a result of "arrangements made" within the 3 year period (even if they factually remain in the same group at the end of the 3 years). The rules governing group relief are complex and taxpayers should consider seeking specialist tax advice where appropriate to ensure that they do not fall foul of group relief requirements.
Where group relief applies, it is vital to remember that the purchaser or tenant must still submit an LBTT return, and indeed Revenue Scotland imposes penalties for failure to notify a transaction, even if no tax is actually due.
LBTT provisions relating to linked/successive leases
If the same landlord grants successive leases of the same property to the same tenant, the LBTT legislation treats this as being a single lease for the total duration of all of the individual leases. It is not possible to avoid tax liability by entering into a series of successive leases, each of which individually would fall below the minimum tax threshold. It also stands to reason that the same would be true of leases which automatically extend from year to year after the end of the contractual term, under the doctrine of tacit relocation.
As soon as a subsequent lease is granted, either expressly or by tacit relocation, which pushes the aggregate of the series of leases over the minimum threshold, the tenant must submit an LBTT return and pay the tax due (if any).
LBTT on options and acquisitions of other interests in land
LBTT is applicable on the acquisition of a chargeable interest in land, and "interests in land" are not limited to acquisitions of heritable title or a leasehold interest. Another common "chargeable interest" is the acquisition of an option to purchase property. In that case, (subject to the option price and purchase consideration together meeting the minimum tax threshold) the purchaser will need to submit two separate LBTT returns, and might need to pay two lots of LBTT. The exercise of the option will most likely be linked to the prior grant of the option (given that the grant and exercise of the option will very likely be deemed by Revenue Scotland to form part of the same scheme between the same buyer and seller) and therefore any LBTT calculations will need to take into account the aggregate total consideration paid under the arrangement. Where a consideration is contingent on uncertain events or is paid at least 6 months after the effective date, as is common with option, it is possible to apply to Revenue Scotland to defer payment of the LBTT.
Although not normally notifiable, certain other rights and burdens affecting land may also attract tax, including the acquisition or variation of servitudes and real burdens, provided the consideration paid in exchange exceeds the nil rate band. It is vital to remember that in such circumstances, an LBTT return should be submitted and any LBTT paid within the usual timeframes.
Get in touch
Harper Macleod has a great deal of experience in dealing with complex and non-standard LBTT transactions such as those mentioned above. We would be happy to help you prepare and submit your LBTT return.
Please get in touch with a member of our team.
- Glasgow: 0141 227 9344
- Edinburgh: 0131 247 2500
- Inverness & Highlands: 01463 795 035
- Elgin: 01343 542623
- Shetland: 01595 695 583