LBTT Guidance: Recovery of Group Relief When Withdrawn or Partially Withdrawn

LBTT Group Relief: Who Can Be Liable if Relief Is Withdrawn

If LBTT group relief is withdrawn or partly withdrawn, the buyer is still the main person responsible for paying the tax due. Revenue Scotland must first issue a notice to the buyer, but if the tax remains unpaid for six months after it becomes payable, Revenue Scotland may also recover it from certain connected persons such as the seller, some parent group companies, or certain controlling directors.

• The buyer is primarily liable once the extra LBTT has been finally determined after withdrawal of group relief.
• Revenue Scotland must serve a notice on the buyer within three years of final determination, stating the amount due and requiring payment within 30 days.
• If the tax is still unpaid six months after it became payable, Revenue Scotland may pursue the seller, a company above the buyer in the group structure, or a controlling director in the relevant period.
• A person who pays the tax and interest instead of the buyer has a legal right to recover that amount from the buyer.
• LBTT paid because group relief is withdrawn cannot be deducted when calculating income, profits, or losses for tax purposes.

Scroll down for the full analysis.

LBTT group relief: who can be made to pay if relief is later withdrawn

This page explains what happens after Land and Buildings Transaction Tax (LBTT) group relief has been withdrawn or partly withdrawn. The main point is that the buyer remains primarily liable for the tax that becomes due, but if that tax is not paid for long enough, Revenue Scotland can in some cases pursue other connected persons as well.

What this rule is about

Group relief can remove or reduce LBTT on certain transactions within a corporate group. But if the conditions for that relief later stop being met, the relief may be withdrawn in whole or in part. When that happens, LBTT becomes payable.

The source material deals with recovery of that tax once the amount due has already been determined. It is not mainly about when relief is withdrawn. It is about who is liable, how Revenue Scotland enforces payment, and when liability can spread beyond the original buyer.

What the official source says

Once the LBTT due because of the withdrawal of group relief has been determined, the buyer is responsible for paying it.

To recover that tax from the buyer, Revenue Scotland must serve a notice on the buyer. That notice:

• requires payment within 30 days after the notice is served;
• must be served within three years beginning with the date the tax was finally determined;
• must state the amount payable;
• is treated as if it were a Revenue Scotland assessment and as if the tax were due from the person served with it; and
• has effect for recovery, interest, and appeal purposes.

If all or part of that tax remains unpaid for six months after it became payable, Revenue Scotland may recover the unpaid amount from certain other persons. Those persons are:

• the seller;
• any company which, at any relevant time, was in the same group as the buyer and was above the buyer in the group structure; or
• any person who, at any relevant time, was a controlling director of the buyer or of a company that controlled the buyer.

If someone other than the buyer pays the tax and interest, that person has a legal right to recover what they paid from the buyer.

The source also states that no deduction is allowed, for any tax purpose, for LBTT paid because relief has been withdrawn. In other words, that LBTT payment cannot be deducted in calculating income, profits, or losses.

For these rules:

• a relevant time is any time between the effective date of the transaction and the date the buyer stopped being in the same group as the seller;
• a company is above another in the group structure if the lower company, or a company above it, is a 75% subsidiary of the higher company;
• director takes its meaning from the income tax legislation and includes certain shadow-director type cases referred to in the corporation tax legislation; and
• controlling director means a director who has control of the company under the corporation tax control rules.

What this means in practice

The starting point is simple: if group relief is withdrawn, Revenue Scotland looks first to the buyer.

But the rules are designed to stop the tax becoming irrecoverable if the buyer does not pay. If six months pass after the tax became payable and it is still unpaid, Revenue Scotland may move up the corporate chain or to other specified persons.

This matters in group reorganisations and post-transaction exits. A company higher up the group, a seller, or a controlling director may face direct recovery action even though they were not the original taxpayer on the land transaction return.

It also means that the commercial risk of a future withdrawal of relief can extend beyond the buyer company. In practice, this is relevant when:

• the buyer may later leave the group;
• the buyer may become insolvent or asset-poor;
• there are changes in ownership or control after the transaction; or
• the group wants to allocate the economic risk contractually between buyer, seller, and parent companies.

The right of a paying third party to recover the amount from the buyer is also important. It means that although Revenue Scotland can collect from others, the law still treats the buyer as the party that should ultimately bear the liability.

How to analyse it

If you are trying to work out whether these recovery rules may apply, the key questions are:

• Has group relief actually been withdrawn or partly withdrawn, and has the resulting LBTT been finally determined?
• Has Revenue Scotland served the required notice on the buyer?
• Was that notice served within the three-year time limit running from final determination of the tax?
• When did the tax become payable under that notice?
• Has any part of it remained unpaid for six months after it became payable?
• Who falls within the list of possible secondary payers during the relevant period?

For group companies, the structural question is whether the company was above the buyer in the group structure at a relevant time. That depends on the 75% subsidiary relationship described in the legislation.

For individuals, the question is narrower but potentially serious: was the person a director, and did they have control of the buyer or of a company controlling the buyer, during the relevant period?

You should also separate two issues that are easy to blur together:

• who is primarily liable to Revenue Scotland at the start, which is the buyer; and
• who can later be pursued if the buyer does not pay within the statutory period.

Finally, if someone other than the buyer pays, there is a further question between the parties themselves: how will reimbursement from the buyer work in practice, especially if there are insolvency or cash-flow problems?

Example

Illustration: Company B buys land from Company S and claims group relief. Later, the conditions for that relief cease to be met, so LBTT becomes due. Revenue Scotland determines the amount and serves a notice on B requiring payment within 30 days.

B does not pay. Six months pass after the tax became payable. Revenue Scotland may then be able to recover the unpaid amount from S, from a parent company above B in the group structure during the relevant period, or from a controlling director of B or of B’s controlling company if the statutory conditions are met.

If the parent company pays the LBTT and interest, the legislation gives that parent company the right to recover that amount from B.

Why this can be difficult in practice

The legal rule is short, but applying it can be fact-sensitive.

One difficulty is identifying the relevant group structure over time. The legislation looks at any relevant time between the effective date of the transaction and the date the buyer left the seller’s group. In a group with reorganisations, insertions of holding companies, or changes in ownership, it may not be obvious which companies were above the buyer during that whole period.

Another difficulty is the control test for controlling directors. The source points to the corporation tax control rules, which can be technical. Control is not always limited to straightforward majority share ownership. The statutory meaning has to be applied carefully to the facts.

There is also a timing issue. The source distinguishes between the date the tax is finally determined, the deadline for serving the notice on the buyer, and the date the tax became payable. Those dates do different jobs. If they are confused, it may be unclear whether Revenue Scotland is still within time or whether the six-month condition for recovery from others has been met.

A further practical point is that the source says the notice is treated as if it were an assessment and has effect for appeals as well as recovery. So the notice is not just an administrative demand. It has formal legal consequences.

Key takeaways

• When LBTT group relief is withdrawn, the buyer is the first person liable for the tax.
• If the buyer does not pay within six months after the tax became payable, Revenue Scotland may pursue the seller, certain parent-group companies, or certain controlling directors.
• A third party who pays can recover that amount from the buyer, and the LBTT paid on withdrawal of relief is not deductible for tax purposes.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: LBTT Guidance: Recovery of Group Relief When Withdrawn or Partially Withdrawn

View all LBTT Guidance Pages Here