A New Tax for Scotland

From 1st April 2015, Stamp Duty Land Tax (SDLT) was replaced in Scotland by Land and Buildings Transaction Tax (LBTT) which is the first fully devolved Scottish tax. The relevant legislation can be found in the Land and Buildings Transaction Tax (Scotland) Act 2013, which was passed by the Scottish parliament on 25th June 2013.

LBTT - How does it work?

LBTT is based very substantially on the former SDLT legislation, which is found in Finance Act 2003. Most of the same concepts and definitions have been retained, but with some changes to reflect differences in underlying Scots property law.

LBTT applies to sales, leases and exchanges of both commercial and residential property in Scotland. It does not apply to licences.

LBTT applies to each “slice” of the taxable consideration falling within the relevant rate band. This differs from the previous position under SDLT where the rate of tax applicable to the highest part of the consideration applied to the whole of the sale price. On 3rd December 2014 the UK Chancellor announced that SDLT will also move to the “slice” basis. This will avoid distortion in the market around the rate threshold.

Some important differences between LBTT and SDLT are:-


Residential leases are exempt from LBTT unless they exceed 175 years.

Commercial and agricultural leases are subject to LBTT based on the net present value (NPV) of the lease. The NPV will be based on the actual rent payable each year and LBTT returns will have to be submitted every three years.


There is no equivalent of the SDLT anti-avoidance provision in the LBTT legislation. However, the Scottish parliament has enacted a Scottish general anti-avoidance rule, in the Revenue Scotland and Tax Powers Act 2014 which applies to devolved taxes. The Scottish general anti-avoidance rule is wider in scope than the UK general anti-abuse rule.

Sub sale relief

As originally enancted there was no sub sale relief for LBTT. After consultation the Scottish government is now legislating for a restricted form of sub sale relief. The LBTT sub sale relief will apply where there is significant development of the land which is the subject of the sub sale within five years of the sub sale. Relief will be given up front and failure to carry out the development in the required timescale will result in withdrawal of the relief.


Many of the existing reliefs for SDLT are reproduced in LBTT including

  • sale and leaseback relief
  • relief for certain acquisitions of residential property
  • multiple dwellings relief
  • acquisitions by registered social landlords
  • alternative property finance relief
  • relief for alternative finance investment bonds
  • crofting community right to buy relief
  • group relief
  • reconstruction relief and acquisition relief
  • relief for incorporation of LLPs
  • charities relief
  • relief for compulsory purchases
  • relief for compliance with planning obligations
  • public bodies relief


The complex and sometimes problematic SDLT rules for transfers of property into and out of partnerships, and transfers of interests in property owning partnerships, have been reproduced in the LBTT legislation in more or less identical form. There was a suggestion that the Scottish government intended to look at the partnership provisions again but this is not likely to happen before commencement of LBTT in April 2015 so the provisions will continue to have to be considered in the context of Scottish land transactions involving partnerships.

Transitional Provisions

The basic rule is that SDLT will not apply to any Scottish land transactions where the “effective date” of the transaction is on or after 1st April 2015. The effective date of a transaction usually means settlement (or completion), but in some circumstances it can be earlier than that. Scottish land transactions with an effective date on or after 1st April 2015 will no longer be “linked” for SDLT purposes with land transactions elsewhere in the UK or with a Scottish land transaction which is subject to SDLT.

Scottish land transactions with an effective date on or after 1st April 2015 will continue to be subject to SDLT if:

  • the transaction is pursuant to missives concluded and substantially performed on or before 1st May 2012 (the day on which the Scotland Act 2012 received Royal Assent); or
  • the transaction is pursuant to missives concluded on or before 1st May 2012 unlessthere has been a variation or assignation of rights under the missives after 1st May 2012.
  • the transaction is effected by the exercise of an option right of pre-emption or similar right after 1st May 2012.
  • after 1st May 2012 there has been an assignation, sub-sale or other transaction the effect of which is that someone other than the purchaser is entitled to call for a conveyance.

A variation of the completion date or transfer to a nominee or bare trustee for the purchaser is not regarded as excluding a transaction from the SDLT charge.

The Scottish government will be bringing forward regulations to ensure LBTT applies in certain cases where SDLT no longer applies.

Administration of LBTT

LBTT is administered by Revenue Scotland, the new tax authority responsible for the administration of Scotland’s devolved taxes. It is supported by The Registers of Scotland.

The LBTT legislation requires the tax to be paid at the time the return is submitted, and before an application for registration of title. Revenue Scotland will be encouraging the submission of online returns but there will continue to be provision for a paper alternative.

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