Land & Buildings Transactions taxes (LBTT) - update
Land & Buildings Transactions taxes (LBTT) – update
Wed 04 Jul 2018
There have been some recent developments concerning LBTT. Two draft Scottish statutory instruments, one concerning group relief, the other concerning first time buyer’s relief, come into effect on 30 June 2018. Legislation has also been amended to provide for relief from the additional dwelling supplement in specific circumstances.
These are all helpful changes for taxpayers. For further discussion of the stamp tax issues involved, please get in touch with a member of the Mazars Land taxes team.
Amended group relief provisions
LBTT group relief is not available if at the effective date of the transaction there are arrangements in place whereby a person or persons could at some time in the future get control of the buyer, but not the seller. The amendment applicable from 30 June 2018 ensures that this restriction does not apply where shares in a company are mortgaged by legal or equitable charge, provided the contingency allowing the mortgage to be called up does not arise. The amendment also applies to situations in Scotland analogous to a pledge, where there are rights in shares or securities transferred to a creditor, subject to conditions requiring the creditor to retransfer the shares/securities back to the debtor if certain conditions are met. The amendment will bring the treatment applied in Scotland in line with that applied in England, Northern Ireland and Wales.
First time buyer’s relief
A draft Scottish statutory instrument is scheduled to come into effect from 30 June 2018 that effectively raises the nil rate threshold for LBTT on residential property from £145,000 to £175,000 for first time buyers. This implements the proposal announced by the Scottish Government in December 2017 when they published their Draft Budget for 2018/19 and can be seen as a response to the introduction of a similar relief for SDLT purposes which took effect from 22 November 2017.
Relief from additional dwelling supplement
Revenue Scotland has issued additional guidance on how to claim relief from the additional dwelling supplement. From 23 June 2018 the rules around the application of LBTT Additional Dwelling Supplement (ADS) changed following the introduction of the LBTT (Relief from Additional Amount) (Scotland) Act 2018. As a result, certain eligible taxpayers may now be able to make a retrospective claim on ADS tax already paid where the transaction involves family units. Although legislation had previously been introduced by Statutory Instrument to provide relief for a replacement of a main residence in similar circumstances to those noted below, it only applied to eligible contracts entered into or after 20 May 2017, where the effective date was on or after 30 June 2017 and was not retrospective. The new amendment now gives retrospective relief back to the introduction of LBTT on 1 April 2016.
Eligible contracts entered into on or after 28 January 2016 and where the effective date of the transaction is on or after 1 April 2016 will now be able to claim a repayment, or relief.
A repayment can be claimed where:
- Spouses, civil partners or cohabitants jointly bought a dwelling which they have both occupied as their main residence, and
- after that purchase, but within 18 months of it, they sold a dwelling that they both occupied as their previous main residence, but it was owned by only one of them.
- A relief can be claimed where:
- spouses, civil partners or cohabitants jointly bought a dwelling which they have both occupied as their main residence,
- in the 18 months prior to the purchase, they sold a dwelling that they both occupied as their previous main residence but this was owned by only one of them, and
- at the effective date of the new joint purchase either buyer owned or was deemed to own a further dwelling.
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