Land and Buildings Transaction Tax (LBTT) is a

property tax A property tax (whose rate is expressed as a percentage or per mille, also called ''millage'') is an ad valorem tax on the value of a property.In the OECD classification scheme, tax on property includes "taxes on immovable property or Wealth t ...

in Scotland. It replaced the

Stamp Duty Land Tax Stamp duty in the United Kingdom is a form of tax charged on legal instruments (written documents), and historically required a physical stamp to be attached to or impressed upon the document in question. The more modern versions of the tax no ...

from 1 April 2015. LBTT is a tax applied to residential and commercial land and buildings transactions (including commercial purchases and commercial leases) where a chargeable interest is acquired. Under the Land and Buildings Transaction Tax (Scotland) Act 2013, a land transaction must be notified to

Revenue Scotland Revenue Scotland () is a non-ministerial office of the Scottish Government responsible for the administration and collection of devolved taxes in Scotland. It is accountable to the Scottish Parliament. History Prior to 1707, Scotland was an ...

unless it falls within one of the exempt categories contained in the Act. Revenue Scotland administers and collects LBTT with support from

Registers of Scotland Registers of Scotland (RoS) () is the non-ministerial department of the Scottish Government responsible for compiling and maintaining records relating to property and other legal documents. They currently maintain 21 public registers. The offic ...

Overview

LBTT is usually paid by the

solicitor A solicitor is a lawyer who traditionally deals with most of the legal matters in some jurisdictions. A person must have legally defined qualifications, which vary from one jurisdiction to another, to be described as a solicitor and enabled to p ...

on behalf of the

buyer Procurement is the process of locating and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. The term may also refer to a contractual o ...

, as part of the administrative process to complete the

conveyancing In law, conveyancing is the transfer of legal title of real property from one person to another, or the granting of an encumbrance such as a mortgage or a lien. A typical conveyancing transaction has two major phases: the exchange of contract ...

transaction, although final responsibility lies with the buyer. Submitting an LBTT

return Return may refer to: In business, economics, and finance * Return on investment (ROI), the financial gain after an expense. * Rate of return, the financial term for the profit or loss derived from an investment * Tax return, a blank document or t ...

and making arrangements to pay the LBTT due is a prerequisite to applying for registration of

title A title is one or more words used before or after a person's name, in certain contexts. It may signify their generation, official position, military rank, professional or academic qualification, or nobility. In some languages, titles may be ins ...

. LBTT is a

progressive tax A progressive tax is a tax in which the tax rate increases as the taxable amount increases. The term ''progressive'' refers to the way the tax rate progresses from low to high, with the result that a taxpayer's average tax rate is less than the ...

, with its structure designed so that the charge rises more than proportionately to the actual price of the property. The percentage rate for each band in LBTT is applied only to the part of the price over the relevant threshold and up to the next threshold.

History

Proposals for

rates Rate or rates may refer to: Finance * Rate (company), an American residential mortgage company formerly known as Guaranteed Rate * Rates (tax), a type of taxation system in the United Kingdom used to fund local government * Exchange rate, rate ...

and bands were announced by the

Cabinet Secretary for Finance, Employment and Sustainable Growth The Cabinet Secretary for Finance and Local Government (), commonly referred to as the Finance Secretary, is a member of the List of Scottish Governments, Cabinet in the Scottish Government. The Cabinet Secretary has Ministerial responsibility f ...

on 9 October 2014, as part of the annual Draft Budget process and tax calculators are available to help taxpayers and agents determine the amount of LBTT due. The proposed tax rates and bands are subject to consultation and Parliamentary scrutiny through the Draft Budget process, led by the Finance Committee of the

Scottish Parliament The Scottish Parliament ( ; ) is the Devolution in the United Kingdom, devolved, unicameral legislature of Scotland. It is located in the Holyrood, Edinburgh, Holyrood area of Edinburgh, and is frequently referred to by the metonym 'Holyrood'. ...

. The

Cabinet Secretary for Finance, Constitution and Economy The Cabinet Secretary for Finance and Local Government (), commonly referred to as the Finance Secretary, is a member of the Cabinet in the Scottish Government. The Cabinet Secretary has Ministerial responsibility for the Scottish Government's ...

announced on 21 January 2015 that he had reviewed the proposed rates and bands for residential property transactions. By 2018, an estimated 90% of Scottish home buyers were paying a smaller amount or the same, compared with Stamp duty. Generally,

lease A lease is a contractual arrangement calling for the user (referred to as the ''lessee'') to pay the owner (referred to as the ''lessor'') for the use of an asset. Property, buildings and vehicles are common assets that are leased. Industrial ...

s of residential property will be exempt from LBTT. For non-residential leases, Schedule 19 of the Land and Buildings Transaction Tax (Scotland) Act will apply. LBTT will be charged on both the

rent Rent may refer to: Economics *Renting, an agreement where a payment is made for the temporary use of a good, service or property *Economic rent, any payment in excess of the cost of production *Rent-seeking, attempting to increase one's share of e ...

and any other consideration paid for the lease. The LBTT on the rent will be payable on the net present value of the rent, and will be subject to a three yearly review that will ensure that the LBTT paid reflects the rent paid.

Rates and bands (2016/17)

Residential property transactions

For residential property transactions, the rate of tax is determined by reference to percentages of the chargeable consideration for the transaction falling within the proposed bands below:

Non-residential property transactions

For non-residential property transactions, the rate of tax is determined by reference to percentages of the chargeable consideration for the transaction falling within the proposed bands below:

Leases of non-residential property transactions

Generally, leases of residential property are exempt from LBTT. For chargeable leases, tax rates and bands apply to the Net Present Value (NPV) of the rent payable under the lease: LBTT may also be payable on chargeable consideration other than rent, such as a premium. The standard tax rates and bands for non-residential property transactions apply to any such payments under a lease:

Exemptions

The Land and Buildings Transaction Tax (Scotland) Act 2013 makes provision for the following exemptions from LBTT: * transactions for which there is no chargeable consideration * acquisitions by the Crown * transfers of property on divorce, separation or the end of a civil partnership * grants of residential leases (other than "qualifying leases" which are due to convert to ownership under the Long Leases (Scotland) Act 2012) * property transferred to a person in relation to the will of a deceased person or the intestacy of a deceased person

Tax reliefs

The Land and Buildings Transaction Tax (Scotland) Act 2013 makes provision for the following tax reliefs from LBTT: * sale and leaseback arrangements – the leaseback element is not charged to avoid double counting * relief for certain acquisitions of residential property * transfers involving multiple dwellings * certain acquisitions by Registered Social Landlords * Alternative Finance Products and Alternative Finance Investment Bonds (AFIB) (includes Islamic finance transactions) to ensure that they are not taxed more than conventional loans * crofting community right to buy * group relief - enables groups to move property between companies for commercial reasons without having to consider LBTT implications * certain transactions in connection with the reconstruction and acquisition of companies * on the incorporation of limited liability partnerships * charities and charitable trusts, subject to certain conditions * where compulsory purchase orders are used by a local authority * land transactions resulting from compliance with planning obligations * transfers involving public bodies

References

{{Reflist Taxation in Scotland Housing in Scotland Property taxes 2015 introductions 2015 establishments in Scotland 2015 in British politics