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Revision of FAQs from 7 February 2018

1.01 Why do leases need to be reviewed?

Land and Buildings Transaction Tax (LBTT) was introduced on 1 April 2015 and it may apply to anyone leasing non-residential land or property in Scotland. Where a notifiable lease has been granted on or after 1 April 2015 then a LBTT return must be submitted by the tenant.

The Land and Buildings Transaction Tax (Scotland) Act 2013 applies differently to how Stamp Duty Land Tax applies in the rest of the UK as it requires the tenant in a lease that has been subject to a LBTT return to submit a further return to Revenue Scotland on certain future events, including:

• Every third anniversary of the lease;

• Assignation of the lease; and

• Termination of the lease (whether the lease is terminated early or on natural expiry).

These further returns will inform Revenue Scotland of any changes that have occurred since the last LBTT return was submitted and will allow Revenue Scotland to review the amount of tax chargeable on the lease taking account of those changes.

1.02 What is the three-year review of leases?

Generally, where a return for a lease has been made under LBTT, a further return must be submitted to Revenue Scotland on every third anniversary of the effective date of the lease (i.e. year 3, year 6, year 9 etc.).

Depending on the tax calculated, taxpayers may need to pay additional tax, there may be no change to the tax due, or they could be able to claim a repayment.

A further return must be submitted every three years, even if there have been no changes to the lease or if no further tax is payable.

1.03 How does this apply when a lease is assigned?

An assignation of a lease is where the existing tenant (“the assignor”) transfers their rights in the lease to someone else as the new tenant (“the assignee”).

When that happens, the assignor must complete and submit a further LBTT return to Revenue Scotland.

After the effective date of the assignation, the assignee assumes the assignor’s duties in relation to LBTT. Anything that was done by the assignor in relation to the lease is to be treated as if it was done by the assignee. As the lease is continuing, further returns will still be required by the assignee for the duration of the lease.

1.04 How does this apply when a lease is terminated?

Termination of a lease means that the lease agreement between the tenant and the landlord has come to an end. This can be as a result of the lease coming to its natural end or otherwise.

When this happens the tenant must complete and submit a further LBTT return to Revenue Scotland.

1.05 How can a return be submitted?

There are three ways to file a further LBTT return:

• Scottish Electronic Tax System (SETS) - The online portal used by solicitors and agents to file LBTT returns will be updated from 1 April 2018 to make it easier to submit further returns. It can be accessed from the homepage of the Revenue Scotland website. This option is not available to private individuals acting in an individual capacity.

• Online lease review return - This option will be available from 1 April 2018. It will also be accessible from the Revenue Scotland website. This option should be used by tenants only.

• Paper return - The updated paper LBTT return will be available from the ‘Forms’ section of the Revenue Scotland website. Guidance on how to submit these returns will be available on the Revenue Scotland website.

1.06 Who is responsible for further lease returns?

The tenant is responsible for submitting the further return and for paying any tax due. The return must be filed within 30 days of the date of the three year anniversary.

In the case of an assignation, it is the outgoing tenant’s (“the assignor’s”) responsibility to submit the further return. From that point, the responsibility to file further returns and pay tax passes to the new tenant (“the assignee”).

If the further return is not submitted or tax is not paid on time, the tenant may be liable to penalties.

1.07 When should a further lease return be submitted?

A further return must be submitted within 30 days of the day after the ‘relevant date’. This is known as the ‘filing date’.

The relevant date is:

• the date of the third anniversary of the effective date of the transaction (and on each subsequent third anniversary of that date);

• the date the lease was assigned;

• or the date the lease was terminated.

1.08 What happens if the further return or payment of tax is late?

LBTT is a self-assessed tax and it remains the responsibility of the taxpayer to complete and submit an accurate LBTT return and, where required, pay any tax due.

A tenant (or in the case of an assignation, the assignor) who fails to make a LBTT return to Revenue Scotland by the filing date is liable to a penalty.

Similarly, a tenant (or in the case of an assignation, the assignor) who fails to pay tax within 30 days of the date payment is due (the day the LBTT return is made) is liable to a penalty. Interest will also be charged on the amount of any unpaid tax from the filing date until the date it is paid.

Further information can be found within the penalties and interest factsheets available at www.revenue.scot/penalties and www.revenue.scot/interest.

1.09 Does this apply to leases under SDLT?

Further lease returns are only required for leases which have been subject to LBTT. If nothing has changed in relation to the lease then it will remain under SDLT and a further return will not be required.

If something about the lease has changed (such as variation to the rent or the lease being extended), it may be treated as a new lease and the tenant may need to submit a new LBTT return rather than a three-year review.

Last updated: 
7 February 2018