Commercial Properties Land and Buildings Transaction Tax (LBTT)
In July 2013, the Land and Buildings Transaction Tax (Scotland) Act 2013 was enacted, establishing the ‘LBTT’ as the tax that is due on the chargeable interest in a property. Both residential and commercial properties are subject to this property tax, which supplanted Stamp Duty Land Tax (SDLT). LBTT was formally implemented on April 1, 2015, and is consequently applicable to all land transactions that take effect on or after that date.
The LBTT system is predominantly derived from the old SDLT system; however, it was designed to integrate some of the underlying nuances of Scots property law into the property tax system, as SDLT is a UK-wide property tax.
Commercial leases
The net present value (NPV) of commercial leases is the basis for LBTT. The annual rent payable is the premise for the NPV, which is evaluated every three years. This necessitates the submission of LBTT returns for commercial and agricultural leases every three years. The NPV of a commercial lease was subject to repeat returns for the first time on 1 April 2018. Licences are presently exempt from paying LBTT.
The rates for LBTT for non-residential leases are as follows:
| NPV of rent payable | LBTT Rate |
| Up to £150,000 | 0% |
| Above £150,000 | 1% |
Commercial purchases
LBTT is a progressive tax, similar to income tax. This implies that distinct rates are assessed on distinct components of the consideration (purchase price). This is where the primary distinction from SDLT is evident, as the entire consideration was assessed at the same rate.
| Purchase price | LBTT Rate |
| Up to £150,000 | 0% |
| Between £150,000 and £350,000 | 3% |
| Above £350,000 | 4.5% |
Who is responsible for administering the LBTT?
Revenue Scotland is responsible for the administration of LBTT, which is backed by Registers of Scotland. Revenue Scotland was established to oversee the administration of LBTT. The two entities exchange information regarding the submission of LBTT returns and new land transfers. This implies that the transfer of title cannot be lawfully registered until the tax return has been submitted and any tax due has been paid if you purchase a property.
You have a 30-day period from the effective date to ensure that a return is submitted and any tax due is paid. Late submission of returns and late payment incur penalties.
Complete Clarity commercial property solicitors would be delighted to help you ensure that any LBTT requirements you may have are addressed promptly.
