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LBTT: what does it mean in practice?

18 May 15

A summary from the Professional Practice team of the main features of the new land and buildings transaction tax

by Alison Mackay

On 1 April 2015, land and buildings transaction tax (LBTT) replaced stamp duty land tax (SDLT) for property transactions in Scotland.

What is LBTT?

LBTT is a tax applied to residential and commercial land and buildings transactions, including commercial acquisitions and leases where a chargeable interest is acquired.

What are the rates?

The LBTT rates for residential and commercial property are different. LBTT is a progressive tax whereby slices of the price are charged at different rates. It has been designed so that the tax is more proportionate to the actual price of the property. 

RESIDENTIAL PROPERTY

Purchase price LBTT rate
Up to £145,000 0%
£145,001 to £250,000 2%
£250,001 to £325,000 5%
£325,001 to £750,000 10%
Above£750,000 12%

 

NON-RESIDENTIAL PROPERTY

(including commercial/agricultural)
Purchase price LBTT rate
Up to £150,000 0%
£150,001 to £350,000 3%
Above £350,000 4.5%

In each case if VAT is payable on the price, LBTT is payable on the price plus VAT.

Commercial and agricultural leases

LBTT will be charged on both the rent and any other consideration/premium paid for the lease. This is calculated on the net present value of the rent. An LBTT return will need to be submitted at the beginning of a lease, on a three-yearly basis throughout its duration and again at the end of a lease.

Net present value of rent LBTT rate
Up to £150,000 0%
Above £150,000 1%
Most residential leases will be exempt from LBTT.

 

Who collects LBTT?

LBTT will be collected by the new Scottish tax authority Revenue Scotland, with support from Registers of Scotland. 

What are the differences in practice?

The main difference is that the Keeper of the Registers will not accept an application for registration in the Land Register unless an LBTT return has been submitted and payment of the LBTT due has been made to Revenue Scotland. There is no 30-day period within which to obtain an SDLT 5 equivalent under LBTT. 

How do I submit an LBTT return and pay LBTT?

Solicitors can submit an LBTT return using the Revenue Scotland portal. Revenue Scotland has issued guidance on how to sign up to the portal (www.revenue.scot/land-buildings-transaction-tax/guidance/how-to). The LBTT online system is more user friendly than the SDLT system and asks for less information, which should make the process easier. It is also possible to submit a paper manual return and pay the LBTT by cheque. 

Alison Mackay is a solicitor with the Professional Practice team at the Law Society of Scotland. This is a follow-up article to that at Journal, September 2013, 38 

 

 

 

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