LBTT rates and bands

John Swinney has announced the proposed rates and bands for the Land and Buildings Transaction Tax (LBTT) as part of the Draft Budget.

LBTT will replace Stamp Duty Land Tax (SDLT) in Scotland on 1 April 2015.  The new tax will have a progressive structure to bands and rates (i.e. tax is charged on the proportion of the price exceeding the threshold (like income tax) rather than charging the higher rate of tax on the whole price (per SDLT). This approach is intended to remove the distortions in house prices which may result from the bunching of sales around the thresholds that can occur with SDLT. 

Residential Purchases
The rates and bands which apply to the purchase of residential properties are as follows: 

Purchase price LBTT rate
Up to £135,000     0%
Above £135,000 to £250,000    2%
Above £250,000 to £1,000,000    10%
Above £1,000,000    12%


Non-Residential Purchases
The rates and bands which apply to the purchase of non-residential properties are as follows:

Purchase price   LBTT rate
Up to £150,000    0%
Above £150,000 to £350,000    3%
Above £350,000    4.5%


Non-Residential Leases
The rates and bands which apply to non-residential leases are as follows (as with SDLT, the rates are applied to the Net Present Value (or NPV) of the rent payable under the lease):

NPV of rent payable   Rate of tax to apply
Up to £150,000   0%
Over £150,000   1%


The following tax rates and bands will also be applied to any premium payable under the lease:

Premium   Rate of tax to apply
Up to £150,000    0%
Above £150,000 to £350,000    3%
Above £350,000    4.5%


Further information and tax calculators are available from the Scottish Government here.
A summary of the Land and Buildings Transaction Tax (Scotland) Act 2013 is available here.

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Marks and Spencer Plc v The Assessor for Highland and Western Isles Valuation Joint Board, 25 October 2013 – contents of written statement in support of appeal against valuation for rating

Case from the Land Valuation Appeal Court. The Valuation Appeal Committee dismissed an appeal from M&S on the basis that M&S’s written statement in support of its appeal (which had been submitted on the last possible day) did not comply with the Valuation Appeal Committee (Procedure in Appeals under the Valuation Acts) (Scotland) Regulations 1995. M&S then appealed to Land Valuation Appeal Court which allowed the appeal.

In order to comply with the regulations the statement had to intimate three essential points; namely (1) the grounds of appeal; (2) the value for which the appellant contended; and (3) the basis on which that value was arrived at. The court found that it had done so. Although the Assessor argued that the statement failed to specify the ground of appeal, the court noted that the statement contended (amongst other things) that the assessor’s valuation was incorrect and excessive and that M&S’s agents disputed the proposed valuation rate. In the view of the court further elaboration was not required.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.


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Schuh Limited and others v. Assessor for Glasgow, 19 November 2013 – valuation for rating – when a fall in rental value amounts to a material change of circumstances

Decision of the Lands Valuation Appeal Court in which a number of ratepayers appealed against the values entered in the roll at the time of the 2005 Revaluation and for their retail premises in Sauchiehall Street in Glasgow. Following the appeal, the Glasgow Valuation Appeal Committee found that a combination of events consisting of the opening of out of town shopping centres, the economic downturn, the withdrawal from the market place of various traders and the expansion and improvement of the St Enoch Centre brought about a material change of circumstances[1] affecting rental values in virtually all retail premises within the principal trading sections of Sauchiehall Street. As such, the values were reduced by 30%.

The Assessor appealed and the Lands Valuation Appeal Court found that only the economic crisis constituted a relevant material change of circumstances and returned the case to the Appeal Committee. After hearing expert evidence from both sides as to how much of the reduction was due to the economic crisis, the Committee allowed the appeals and found that the valuations should be reduced by 6.66%[2]. The ratepayers argued that the reduction should have been the full 30% and requested that the Committee state a case for the Appeal Court. The Assessor cross appealed arguing that there should be no reduction at all.

Before the Appeal Court the ratepayers argued that the court should:

  1. resile from its previous decision in this case and decide instead that any change in rental value in an intermediate year, whatever the cause, was per se a material change of circumstances, except where it was trivial;
  2. restore the original decision of the Committee (and reduce the values by 30%).

The Appeal Court rejected those arguments and refused the appeal (and cross appeal). The court was satisfied its previous decision was sound in law. It noted that, while a material change of circumstances may now[3] consist of a fall in rental value, not every fall in rental value constitutes a material change of circumstances. If that were the case the whole system of quinquennial revaluation would be undermined:

 “The system of quinquennial revaluation is based on the principle that subjects entered in the roll at a revaluation will remain at the same value until the next revaluation, unless a material change of circumstances occurs in the interim. In reality, the rental values of commercial subjects of all kinds may fluctuate constantly throughout the quinquennium. The submission for the appellants, if sound, would apply to all lands and heritages that are entered in the roll. If every downward fluctuation, whatever the cause, constituted a material change of circumstances, the whole basis of quinquennial revaluation would be undermined. The quinquennium would consist of an endless series of material change appeals relating to all kinds of lands and heritages.”

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

[1] In terms of section 3(4) of the Local Government (Scotland) Act 1975.

[2] The expert witness led by the assessor took the view that there had been no reduction in rental value at all; but submitted that if the Committee were to hold that such a reduction had occurred, it should be in the order of 6.66%.

[3] The Rating and Valuation (Amendment) (Scotland) Act 1984 amended the definition of “material change in circumstances” in the 1975 Act so as to include changes in rental value.

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Land and Buildings Transaction Tax (Scotland) Act 2013– a quick summary

The Land and Buildings Transaction Tax (Scotland) Act was passed on 25 June and received royal assent on 1 August 2013. Some points of note:

  • The new tax will to come into effect in April 2015 (when SDLT ceases to apply in Scotland);
  • the Act is the first of three- a Landfill Tax Act and Tax Management Act will follow;
  • the Scottish Ministers are the tax authority (s54) but the authority can be changed by order (a new body, Revenue Scotland has been established for that purpose);
  • the tax authority can delegate administration and collection of the tax to Registers of Scotland (s55) (an idea first suggested by my colleague James Aitken);
  • the tax will be progressive, i.e. tax is charged on the proportion of the price exceeding the threshold (like income tax) rather than charging the higher rate of tax on the whole price (per SDLT)(ss24-26)
  • like SDLT, LBTT will be charged on VAT (para 2, Schedule 2)
  • the Act contains a number of targeted anti-avoidance rules applying to specific exemptions and reliefs. The Scottish Government has consulted on the introduction of a general anti-avoidance rule (“GAAR”) and it is likely that a GAAR will be included in the Tax Management Act;
  • LBTT on commercial leases will (like SDLT) be based on net present value of the rent payable (s52 and Schedule 19) but the Act also makes provision for a return to be made every three years (and for additional payments or refunds) throughout the whole term of the lease so that the tax will reflect the actual rent paid;
  • residential leases are exempt (s16 and para 3, Schedule 1);
  • licences to occupy are exempt (s16 and para 3, Schedule 1) but “prescribed non-residential licences” which are to be prescribed in future regulations will be taxed; and
  • the Act replicates existing SDLT provisions on partnerships (s49 and Schedule 17) & trusts (s50 and Schedule 18). However, the Scottish Government may make changes to these provisions (in the interests of greater clarity) before LBTT comes into effect.
  • The rates and bands can be seen here.

The full Act is available here.


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“Tax and constitutional change” presentation

Tax issues are and will continue to play a central role in the Scottish independence referendum debate.  The debate is not just about whether tax powers reside in Edinburgh or London.  What about Brussels or each local authority?  What about tax avoidance?  What about the type and form each tax takes?  If Scotland votes ‘YES’ should it retain the UK system for a number of years before any major changes are made?

The presentation is in three main parts and continues on from my blog: “Tax powers so far refused by Westminster”.  This blog can be found here.

1. The present position and the “battle for Scottish tax powers”

2. What the Unionist parties are likely to offer in the event of a ‘NO’ vote

3. Compare and contrast this with a ‘YES’ vote

If you would like to find out more about this presentation please feel free to contact me at:

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Community Amateur Sports Clubs (CASC) consultation

HMRC has published a consultation paper on amending the qualifying conditions for Community Amateur Sports Clubs for comments by 12 August 2013.

More on this can be found here.

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UK “statutory residence test” guidance

Legislation introduced in Finance Bill 2013 puts the rules which determine an individual’s tax residence on a statutory basis.

HMRC has published guidance to help customers decide if they are resident in the UK for the purposes of paying tax.

The guidance can be found here.

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Northern Ireland carrier bag levy

From 8 April 2013, retailers operating in Northern Ireland must charge their customers at least 5p for new single use carrier bags used to contain purchased goods, such as groceries or clothing.

The proceeds of the levy will be forwarded to the Northern Ireland Department of Environment and will be used to fund environmental programmes and activities.

More on this can be found here.

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Scottish tax powers and a Scottish tax system

The debate over further fiscal powers, and in particular tax powers, for the Scottish Parliament is going to be a major issue as Scotland moves towards 18 September 2014.

Not many people know that there are over 25 taxes and duties.  The Scottish Parliament only controls two of these outright.  The other power over income tax has never been used and cannot now be used.

Even under Scotland Act 2012 the Scottish Parliament will only have control of four miscellaneous taxes and partial control of income tax.

If you would like to know more about the issues surrounding the tax powers debate and the creation of a Scottish tax system, whether under further devolution or independence, please contact James Aitken.



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HMRC tax guides for farmers

HMRC has been working with farming bodies in Scotland to produce a series of free, tailor-made, online educational tax guides.

The first guide, Starting your own Agricultural Business, was designed with the help of the National Farmers Union (NFU). This has now been supplemented with packages for the NFU Scotland and Scotland’s Rural College.

The Starting your own Business e-learning tutorial includes:

• an overview of tax, National Insurance contributions and VAT
• information on registering as self-employed
• guidance on keeping business records
• help with completing tax returns
• information on paying HMRC

More on this can be found here.

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