Land & Buildings Transactions Tax (LBTT) and the three year return requirement for leases
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Land & Buildings Transactions Tax (LBTT) and the three year return requirement for leases
Land & Buildings Transactions Tax (LBTT) and the three year return requirement for leases
Wed 07 Feb 2018
LBTT replaced stamp duty land tax (SDLT) in Scotland with effect from 1 April 2015. Whereas for SDLT, a return in respect of rent for a notifiable lease transaction is generally only required when a lease is granted or when it is extended beyond its fixed term (by agreement or operation of the law), for LBTT a new return for a lease granted for more than three years is required on each three year anniversary.
The first possible third year anniversary is on 1 April 2018.
The filing date for an LBTT return is within 30 days after the effective date of the transaction. Thus for a lease where the third year anniversary is 1 April 2018, the filing deadline for the three year anniversary return is 1 May 2018 (where the three year anniversary is 1 May 2018, the filing deadline will be 31 May 2018).
Revenue Scotland’s guidance on LBTT and leases can be found here. Revenue Scotland recently held a meeting to discuss the three year anniversary filing requirement for leases. Slides notes and examples from that meeting can be accessed here.
Broad comparison of SDLT and LBTT for leases
For SDLT a notifiable lease transaction is in summary one that breaches the 0% threshold (currently a net present value (NPV), calculated as specified in the legislation, of £125,000 for residential property and £150,000 for non-residential or mixed property), or is for a term of seven years or more where the chargeable consideration for rent over the term equals or exceeds £40,000. HMRC guidance on chargeable consideration in the form of rent can be found here.
For LBTT residential rents are generally exempt from LBTT (unless they are certain long-leaseholds).
The threshold below which no LBTT is payable on leases is where the NPV of the rents over the lease term is £150,000 or less. As noted above, however, in contrast to SDLT, LBTT requires a new submission on every three year anniversary of a lease to take account of any changes to rent charges that have occurred in the interim.
Other developments
Please also note that LTT replaces SDLT for land transactions in Wales from 1 April 2018. The LTT rules are closer to those for SDLT than they are for LBTT but there are differences. Guidance from the WRA (Welsh Revenue Authority) will be available in the next two months. See further details on the WRA web-site.
For further advice on the LBTT implications of leases, please get in touch with a member of the Mazars indirect tax team.
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