Gillespie Gifford & Brown

LBTT Tax Returns required for commercial leases


The Land & Buildings Transaction Tax commenced 3 years ago on 1st April 2015. What many people didn’t fully appreciate at the time was that those who entered into a commercial lease on or after that date and were subject to Land & Building Transaction Tax would then be required to submit a Land & Buildings Transaction Tax every third year from the anniversary of the “effective date” (this will mostly be the date of entry under the lease).

Just to make clear for those of our commercial clients who may be concerned, a return is NOT required for any lease that was subject to either Stamp Duty or Stamp Duty Land Tax.

Commercial tenants should also be aware that a Land & Buildings Transaction Tax return will also be needed should there be an Assignation of the lease (the Assignee being responsible for the return) or where there is a variation in the terms of the lease.

The thinking behind this latest legislation is that when someone buys a property, the Land & Buildings Transaction Tax is paid based on the value of the transaction. It’s easy to assess that in a purchase because the tax is payable on the purchase price. It’s more difficult to assess the capital value in a lease because things change over time. Generally, there will be regular rent reviews which inevitably mean an increase in the rent (although it can do down too – but that tends to be rare) and there may be a variation in the terms of the lease which has an impact on the rent. The lease may be assigned to someone else and, again, that might have an impact on the rent.

The obligation to make the return is on the Tenant and if the tenant fails to make the return or makes the return but then fails to pay any tax due, penalties will be applied that the tenant will have to pay.

This area of law is complex and we recommend you discuss any concerns you have with us. It is important to remember, if you’re a tenant and your lease is subject to Land & Buildings Transaction Tax, it is your (not our) responsibility to make the Land & Building Transaction Tax Return.

If you would like further information on Land & Building Transaction Tax, please connect to the Revenue Scotland website where you’ll find very detailed information and instructions. You can visit the Revenue Scotland website by clicking here.

Please contact us if you need our assistance.

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