LBTT6014 - Three yearly review of the tax chargeable

LBTT guidance on the requirement every three years to make a LBTT return and review the tax chargeable in relation to a land transaction which is notifiable for LBTT purposes.

For tax purposes, leases have to be treated quite differently to standard purchases of land and buildings. In most cases, when a purchase is completed, any LBTT is paid and the title is registered; there is no likelihood of change to the tax position.

Leases, however, often continue over a period of years and can be subject to change through, for example, variations, extensions, assignations, rent reviews and tacit relocation, and the tax position must be reviewed to give effect to these changes.

The LBTT legislation does not require a further LBTT return to be submitted to us every time a change to the lease takes place. Instead, it requires that unless the lease has been terminated or assigned, a further LBTT return is to be submitted by the tenant at every third anniversary of the effective date of the lease (i.e. year 3, year 6, year 9 etc.) and any additional LBTT paid or overpaid LBTT reclaimed.

This requirement applies equally to variations to leases treated as new leases under the LBTT (Transitional Provisions)(Scotland) Order 2014, as such returns are land transaction returns under section 29 of the LBTT Act 2013.

These three year review LBTT returns will inform us of any changes that have occurred since the effective date or last review date and will allow us to review the amount of tax chargeable on the lease taking account of those changes. Similarly, the rent - as well as the lease - can be subject to changes, such as variations in turnover-based rents.

This is a change from the position applicable under SDLT.

Further guidance on completing an LBTT return in relation to the review of a lease, and the lease review date, can be found here:

LBTT(S)A 2013 schedule 19 paragraph 10

Archive Date: 
14 October 2016
Last updated: 
14 October 2016

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Updated date: 2016-04-14 09:51
Version ID: 720
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