Guidance on LBTT Sale and Leaseback Relief Conditions and Claiming Process

LBTT Sale and Leaseback Relief on the Leaseback

LBTT sale and leaseback relief is a limited relief that can remove the tax charge on the lease granted back to the seller in a qualifying sale and leaseback transaction. It does not usually relieve the original sale, and it only applies if all statutory conditions in the LBTT rules are met.

• A sale and leaseback involves the owner selling property to a buyer and then taking a lease of the same property, or part of it, back from that buyer.
• The relief applies to the leaseback transaction only, helping prevent a separate LBTT charge on that second step.
• One condition is that the sale must be made wholly or partly in return for the leaseback, so the lease must be part of the same overall bargain.
• Any other consideration for the sale must be only money or debt-related consideration such as the assumption, satisfaction or release of debt.
• If both parties are companies, the relief will not apply if they are in the same group for LBTT group relief purposes at the effective date of the leaseback.
• In practice, the contracts, lease documents, side arrangements and group status should be checked carefully, and any claim must be made properly through the LBTT return process.

Scroll down for the full analysis.

LBTT sale and leaseback relief: when the leaseback is relieved from tax

This page explains a narrow but important LBTT relief for sale and leaseback transactions. In a typical sale and leaseback, a property owner sells land or buildings to a buyer and then takes a lease of the same property, or part of it, back from that buyer. The relief is aimed at preventing LBTT from arising on that second step, the leaseback, if the statutory conditions are met.

What this rule is about

A sale and leaseback is a two-part arrangement. First, the owner sells the property. Second, the buyer grants a lease back to the seller, who stays in occupation as tenant.

Without a specific relief, there can be a tax charge on the leaseback as a separate land transaction. Schedule 3 to the Land and Buildings Transaction Tax (Scotland) Act 2013 provides relief so that, in qualifying cases, the leaseback does not bear LBTT.

The relief is not a general exemption for all sale and leaseback arrangements. It only applies where the statutory conditions are satisfied.

What the official source says

The official guidance states that sale and leaseback relief is provided by schedule 3 to the LBTT legislation. It applies where a buyer purchases land or buildings from a seller and then leases the same property, or part of it, back to that seller.

The guidance says all three conditions below must be met:

• the sale must be entered into wholly or partly in consideration of the leaseback
• any other consideration for the sale must consist only of money, or the assumption, satisfaction or release of debt
• if both parties are companies at the effective date of the leaseback, they must not be members of the same group for group relief purposes

If those conditions are met, the leaseback transaction is relieved from LBTT.

What this means in practice

The practical effect is that the tax focus remains on the sale, while the lease granted back to the former owner can be relieved. This matters because the leaseback is a separate transaction in legal terms, and without relief it may otherwise give rise to LBTT.

The first condition is about the commercial link between the two steps. The sale must be made wholly or partly in return for the buyer granting the lease back. In other words, the leaseback must form part of the bargain, not be an unrelated later arrangement.

The second condition limits what else the seller can receive for the sale. Apart from the leaseback, the remaining consideration must be money or debt-related value of the kind listed in the legislation. If the seller receives some other non-cash benefit, the relief may fail.

The third condition prevents the relief applying where, at the effective date of the leaseback, both parties are companies in the same group for LBTT group relief purposes. That means intra-group corporate arrangements need separate checking rather than assuming this relief applies.

How to analyse it

A sensible way to test the relief is to work through the transaction in order.

First, identify the two land transactions. Is there a genuine sale of land or buildings to a buyer, followed by a lease of the same property, or part of it, back to the seller?

Second, ask whether the leaseback is part of the consideration for the sale. This is a legal and factual question. You would usually look at the sale contract, lease documentation, heads of terms, and the overall deal structure.

Third, identify all other consideration given for the sale. If anything other than money or the assumption, satisfaction or release of debt is being provided, that may prevent the relief from applying.

Fourth, if both parties are companies, check their group relationship at the effective date of the leaseback. The legislation directs attention to whether they are members of the same group for group relief purposes.

Finally, remember what the relief does and does not do. Based on the official material, it relieves the leaseback transaction. It does not say that the original sale is relieved.

Example

Illustration: A trading company owns its business premises in Scotland. It sells the premises to an investor and, as part of the same deal, the investor grants a lease of the premises back to the company so the business can continue operating there. The company also receives a cash price for the sale. If the leaseback forms part of the consideration for the sale, the rest of the consideration is only cash, and the parties are not companies in the same group at the relevant time, the leaseback can qualify for sale and leaseback relief.

Why this can be difficult in practice

The official guidance is brief, but the conditions can be quite technical in real transactions.

One difficulty is working out whether the sale was entered into wholly or partly in consideration of the leaseback. That usually depends on the legal documentation and the substance of the arrangement. If the leaseback was negotiated separately, added later, or not clearly tied into the sale terms, the position may be less straightforward.

Another difficulty is identifying whether there is any non-cash consideration beyond what the legislation allows. Complex financing arrangements, side agreements, or additional rights granted between the parties may need careful analysis.

The corporate group condition can also be easy to overlook. The guidance points specifically to the parties’ status at the effective date of the leaseback, and it uses the group relief test rather than a looser commercial idea of being connected.

Finally, the guidance does not explain the detailed mechanics of making the claim beyond referring readers to the separate LBTT return and payment guidance. In practice, the claim still has to be made correctly in the LBTT compliance process.

Key takeaways

• Sale and leaseback relief can remove the LBTT charge on the leaseback part of a qualifying transaction.
• The relief only applies if all statutory conditions are met, including strict rules on consideration and corporate group status.
• The key practical questions are whether the leaseback is part of the bargain for the sale and whether any disallowed non-cash consideration is present.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guidance on LBTT Sale and Leaseback Relief Conditions and Claiming Process

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