Land and Buildings Transaction Tax – New Scottish Tax Explained
Having acquired the power to introduce devolved taxes, the Scottish Parliament has now introduced two new taxes, one of them being Land and Buildings Transaction Tax (LBTT). It replaces Stamp Duty Land Tax (SDLT) and will be administered by a new tax authority – Revenue Scotland.
LBTT is a tax applied to residential and commercial land and buildings transactions (including commercial purchases and commercial leases) where an interest in or over land is acquired, for example ownership of a house or a lease of industrial premises. As in the case of SDLT, LBTT is a percentage payable on the amount of chargeable consideration, i.e. the price of the transaction, such as price paid for the house or premium and rent payable over the term of the lease. Unlike SDLT however, LBTT is a progressive tax, which means that, like Income Tax, each tax rate applies only to the portion of the consideration within the relevant rate band.
The LBTT bands and rates to be applied differ depending on the type of property and the type of transaction:-
Residential property purchases:-
- 0% up to £145,000;
- 2% for the part of the price above £145,000 to £250,000;
- 5% for the part of the price above £250,000 to £325,000;
- 10% for any part of the price above £325,000 to £750,000; and
- 12% for any excess over £750,000.
Our LBTT calculator will show you how much tax is payable in relation to a residential purchase.
Commercial property purchases:-
- 0% up to £150,000;
- 3% for the part of the price above £150,000 to £350,000; and
- 4.5% for any excess over £350,000.
- 0% up to £150,000 of the net present value (NPV) of the total rental payments (including VAT) to be made over the whole duration of the lease (no longer based on the first five years only); and
- 1% over £150,000 of NPV of the total rental payments (including VAT) to be made over the duration of the lease.
Our LBTT Non-residential calculator will show how much tax is payable on commercial transactions.
Despite the NIL rate applicable to all types of properties, all transactions above £40,000 must be notified to Revenue Scotland, unless exempt. The list of exempt transactions includes transactions for no chargeable consideration, transfers of property on divorce, separation or the end of a civil partnership, grant of residential leases and property transferred to a beneficiary in the estate of a deceased person.
It should be noted that replacement of SDLT regime with LBTT will not affect liability for Annual Tax on Enveloped Dwellings and companies in ownership of high value residential property in Scotland will still have to pay appropriate annual charge.
Revenue Scotland will begin to collect LBTT on 1 April 2015.
If either you or your business requires any advice in connection with submitting an LBTT return or a property-related matter generally, please contact our Commercial or Residential Property Teams on 01224 632464 or 01224 868687.