Land and Buildings Transaction Tax

MAY 14, 2014 ‹ back to news & views

Land and Buildings Transaction Tax (LBTT) is a new tax on property transactions in Scotland, which will replace Stamp Duty Land Tax (SDLT) in April 2015.

It is expected LBTT will take effect regardless of the outcome of the approaching referendum on Scottish independence. The new tax will apply where the land concerned is in Scotland. SDLT will continue to apply to land in England and Wales.

SDLT is a “slab” tax i.e. the whole of the price is charged at the highest applicable rate, if it exceeds the nil rate threshold. LBTT is to be a “progressive” tax i.e. the tax will be charged at various rates through certain bands e.g. similar to Income Tax, with the results added together.

It is expected the tax will be geared to raise an income equal to or greater than the sum SDLT currently generates in Scotland but the intention is understood to be that high value transactions i.e. over £2 million will incur more tax than the SDLT regime, with transactions under £2 million in value incurring less tax.

The bands and rates for LBTT have yet to be announced. The Scottish Government will have control over the rates. It is expected the tax will be collected by the Registers of Scotland, working in conjunction with a new body to be known as “Revenue Scotland”, rather than HMRC.

The transitional rules are unknown at present but those making deals today where completion may occur after April 2015, should be aware of the risk of increased transaction costs so they can plan accordingly.

Further information is available at www.scotland.gov.uk/Topics/Government/Finance/scottishapproach/lbtt

philipbuchan@r-r-urquhart.com