Many people will be aware that Land and Buildings Transaction Tax (LBTT) replaced Stamp Duty Land Tax (SDLT) in Scotland for land transactions in Scotland from 1 April 2015.
While they both seek to generate the same type of revenue, one of the significant differences between LBTT and SDLT relates to agricultural and commercial leases. If you are the tenant under such a lease and if you submitted an LBTT return to Revenue Scotland when you took out the lease, you need to submit additional LBTT returns to Revenue Scotland every three years during the currency of the lease. There is no three year review process for leases taken out before 1 April 2015, which should remain within the SDLT system unless and until they are varied or extended, which may bring them into the LBTT regime.
Revenue Scotland has started to issue reminders for three yearly lease reviews which fell due on or after 1 April 2018, that being the third anniversary of the introduction of LBTT. Revenue Scotland aims, but cannot guarantee, to issue reminders around three months in advance of when the review return is due, which is thirty days after the third anniversary of taking out the lease.
If the rent payable under the lease and/or the term of the lease have been increased during the first three years, additional LBTT may be due, while if the rent and/or term have decreased, an LBTT repayment may be due. In the event that there have been no changes during the review period, while no additional LBTT will be due, the important point to take away from this is that a return is still needed. A penalty of up to £1,000 may be charged for a late return even if no tax is due, and higher penalties, linked to the tax payable, may be charged where a return is late and tax is due. Even if you don’t receive a reminder, the return still needs to be filed on time and Revenue Scotland will not accept the absence or non-receipt of a reminder as an excuse for late filing.
In addition to the three yearly review return, you may also need to submit an additional LBTT return to Revenue Scotland if you assign your lease to someone else or if the lease comes to an end. These requirements have been in place since the introduction of LBTT on 1 April 2015.
LBTT, particularly in its application to leases, is a complex subject. If you need further information or advice on three year review returns or on any other LBTT related issues, Campbell Dallas have extensive experience of advising clients in this area. If you want to discuss any of the points raised in this article, please get in touch with our specialist tax consultancy team here.
The information in this article should not be regarded as financial advice. This is based on our understanding in December 2018. Laws and tax rules may change in the future.