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Land and Building Transaction Tax – Three Yearly Returns

It has been almost three years since Land and Buildings Transactions Tax or LBTT replaced Stamp Duty Land Tax (SDLT) in Scotland in April 2015. The tax is payable on the chargeable interest in the property so is payable on both purchases of properties and leases of commercial properties.

The difference between LBTT for purchased and leased properties is the requirement of three yearly reviews of the tax due under commercial leases. This means that the first three-year review payments will soon be due.

When a commercial lease is first granted, an LBTT return will have been submitted to Revenue Scotland along with the tax payable (unless the lease or property is exempt from paying LBTT) and this is required to be reviewed every three years.  As the LBTT regime only came into effect on 1 April 2015, this means that the first three-year review is upcoming and the first three-year returns will be due on 1 April 2018.

A return must be made every three years regardless of whether any tax is due (i.e. where the rent has not increased, tax will not be due but a return must still be made to Revenue Scotland).

The relevant date for review of the tax payable is the third anniversary of the effective date of the lease. So, what is the effective date? The effective date is either the last date that the lease was signed or the last date of conclusion of missives of let (if that is where the lease is contained).

Making an LBTT return

If you have taken out a lease in the past three years your solicitor would have most likely dealt with any LBTT due on your behalf, however it is your responsibility to ensure that a return is made and any tax paid. 

One thing to bear in mind is that the responsibility for LBTT falls with the current tenant under the lease. For example, if you entered into a commercial lease on 8 July 2015 and assigned the lease to someone else on 12 November 2015 then the current tenant will be required to submit an LBTT return and pay any tax due within 30 days of the 8 July 2018. The relevant date will relate to the original lease, rather than the assignation.

What if I forget to review and pay?

You have 30 days from the effective date to ensure a return is submitted and any tax due is paid. There are penalties for late filing of returns and late payment.

If you have entered into a commercial lease in the last three years then it is highly likely you are soon required to submit a return and possibly pay tax.

Here at Claphams, our commercial property department would be delighted to assist in ensuring that any LBTT requirements you may face are dealt with timeously.

Contact our Commercial Leasing Lawyers Clarkston, Newton Mearns, Giffnock, Netherlee, Eaglesham, Carmunnock, Stewarton & Southside Glasgow

For expert commercial leasing advice, contact Claphams today on 0141 280 7686 or fill out our online enquiry form.

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