Land and Building Transaction tax, which is the Scottish replacement for SDLT, is now chargeable from 1 April 2015.
The Land and Buildings Transaction Tax (Scotland) Act 2013 was passed in July 2013.
LBTT has been operational from 1 April 2015.
Transactions that implement contracts entered into on or before 1 May 2012 will, however, still be subject to SDLT even if they complete on or after 1 April 2015 - unless the contract was varied or assigned after 1 May 2012 or the transaction was triggered by an option exercised after that date.
Method of Charge:
For LBTT:
Residential leases are to be exempted from LBTT (unless they are for longer than 175 years).
Commercial leases will pay LBTT at the same rate as for SDLT on rent - but tenants will be required to submit LBTT returns every 3 years, if there is an assignation of the lease and at lease end - with LBTT being adjusted if applicable. There will be no cut off on assessment at the end of year 5, as there is with SDLT. LBTT on any capital payment will be at the same rates as for a purchase.
Any rent deposit by a tenant on a new lease, or by an assignee taking an assignation of an existing lease, will be treated as part of the consideration for the lease or assignation (as applicable) for LBTT purposes, IF it exceeds twice the rent. This is particularly odd in the context of an assignation, where the deposit would be paid to the landlord, not to the assignor.
Reliefs
There are many reliefs from SDLT, and most are to be replicated in LBTT with the notable exception of sub sale relief.
Although there will generally be no sub sale relief from LBTT, the Scottish Government do intend to introduce a targeted relief, for development projects (excluding the development of agricultural buildings and mining and engineering work - but windfarms development is not excluded).
The relief will only be available if a significant development is proposed. If no development is carried out within 5 years, the relief is withdrawn and the full LBTT then becomes payable. If only some development is carried out within 5 years, then part of the relieved LBTT will be repayable.
Timing for payment:
SDLT is payable within 30 days of the effective date (which is usually, but not always, the completion date). SDLT does not have to be paid at the same time as submission of the tax return.
LBTT will be payable at the same time as submission of the tax return, as part of the process of registration of title. The return must be submitted, and the tax paid, within 30 days of the effective date.
Non–Residential Rates
METHOD OF CHARGE:
LBTT (for both commercial and residential property) is charged only on the excess above a threshold – known as a progressive tax.
NIL RATE THRESHOLD:
LBTT has a nil rate up to £150,000 for commercial property.
RATES FOR COMMERCIAL PURCHASES:
For LBTT the rates are:
3% for the part of the price between £150,001 and £350,000 and
4.5% for any excess over £350,000
Non-residential Leases
Net present value of rent up to £150,000-0%
Net present value of rent over £150,000-1%
Premium up to £150,000-0%
Premium £150,000 - £350,000-3%
Premium greater than £350,000-4.5%