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Land and Buildings Transaction Tax (LBTT) for Commercial Properties

  • The Law Society of Scotland
0141 620 0800 Existing Clients call: 0141 620 0800

The Land and Buildings Transaction Tax (Scotland) Act 2013 was passed in July 2013 and introduced ‘LBTT’ as the tax payable on the chargeable interest in a property. This replaced Stamp Duty Land Tax (SDLT) and is payable on both residential and commercial properties. LBTT officially came into force on 1 April 2015 and, therefore, applies to all land transactions with an effective date on or after the 1 April 2015.

LBTT is primarily based on the old SDLT system, however as SDLT is a UK-wide tax, the LBTT system looked to incorporate some of the underlying nuances of Scots property law into the property tax system.

Commercial leases

Commercial leases are subject to LBTT based on the net present value (NPV) of the lease. The NPV is based on the rent payable each year and this is assessed on a three-yearly basis. This means that LBTT returns relating to commercial and agricultural leases will have to be submitted every three years. 1 April 2018 marked the first occasion when any repeat returns were payable on the NPV of a commercial lease. Licenses are currently exempt from having to pay LBTT.

The LBTT rates for non-residential leases are as follows:

NPV of rent payable 

LBTT Rate

Up to £150,000

0%

Above £150,000

1%

Commercial purchases

Like income tax, LBTT is a progressive tax. This means that different rates are charged on different parts of the consideration (purchase price). This is where the main difference from SDLT is clear, where the whole of the consideration was charged at the same rate.

Purchase price 

LBTT Rate

Up to £150,000

0%

Between £150,000 and £350,000

3%

Above £350,000

4.5%

Who deals with administering LBTT?

LBTT is administered by Revenue Scotland and is supported by Registers of Scotland. Revenue Scotland was created for the purpose of administering LBTT. The two entities share information as to new transfers of land and LBTT returns that have been submitted. This means that if you purchase a property you will be unable to legally register the transfer of title until the tax return has been submitted and any tax due has been paid.

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.

The commercial property lawyers at Claphams would be delighted to assist in ensuring that any LBTT requirements you may face are dealt with timeously.

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

For expert commercial property advice, contact Claphams today on 0141 620 0800 or fill out our online enquiry form.

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