Relief from LBTT for Local Authorities’ Land Acquisitions and Compulsory Purch

LBTT relief for some local authority land purchases in Scotland

Scottish LBTT relief can remove LBTT and any related Additional Dwelling Supplement from certain land purchases by local authorities. There are two separate reliefs: one for some housing-related acquisitions from 1 April 2024, and another for certain compulsory purchase transactions where the local authority acquires land for development by a third party.

• The buyer must be a local authority; otherwise neither relief applies.
• The Schedule 6A relief, effective from 1 April 2024, may apply where the purchase is linked to providing housing accommodation or is funded by a qualifying housing grant or financial assistance under the Housing (Scotland) Act 1988.
• The Schedule 14 relief may apply where a local authority acquires land through a compulsory purchase order that meets the planning law conditions and the land is being acquired for development, redevelopment, improvement or another proper planning purpose.
• For compulsory purchase relief, the developer must be a third party. If the local authority will carry out the development itself, the relief is not available.
• The relief does not apply automatically and must be claimed in the LBTT return or by amending the return within the allowed time limit.

Scroll down for the full analysis.

LBTT relief for certain local authority purchases, including some compulsory purchases

This page explains a Scottish LBTT relief that can remove LBTT, and any associated Additional Dwelling Supplement, from certain land purchases by local authorities. It covers two distinct reliefs: one for some housing-related acquisitions by local authorities from 1 April 2024, and another for certain compulsory purchase transactions where a local authority acquires land so that a third party can carry out development.

What this rule is about

LBTT is normally charged when land is bought in Scotland. In some cases, however, the legislation gives relief so that tax is not payable on a qualifying transaction.

The source material deals with two separate reliefs:

• a relief for certain acquisitions by local authorities, introduced with effect from 1 April 2024 under Schedule 6A to the LBTT legislation; and
• an older relief for certain compulsory purchase transactions under Schedule 14.

These reliefs matter because local authorities often acquire land for public housing purposes or as part of planning and redevelopment schemes. Without relief, LBTT could arise even where the acquisition is part of a wider public function.

What the official source says

According to the official material, relief is available where the buyer is a local authority and one of the qualifying conditions is met.

For the Schedule 6A relief, the local authority must satisfy either of these conditions:

• the transaction is in connection with the provision of housing accommodation, by reference to section 2 of the Housing (Scotland) Act 1987; or
• funding for the transaction is through a grant or other financial assistance under section 2 of the Housing (Scotland) Act 1988.

The source also states that this relief applies from 1 April 2024.

Separately, Schedule 14 provides relief for certain compulsory purchases. The source says the conditions are that:

• the purchase is by a local authority;
• the purchase is through a compulsory purchase order;
• the order must comply with section 189 of the Town and Country Planning (Scotland) Act 1997;
• the acquisition must be for development, redevelopment or improvement of land, or for another purpose needed in the interests of proper planning of an area; and
• the developer must be a third party.

The official guidance also makes an important point: if the developer is the local authority itself, this compulsory purchase relief is not available.

As for procedure, the source says a relief claim must be made either:

• in the original LBTT return; or
• by amending the LBTT return within the amendment period.

What this means in practice

The first practical question is whether the buyer is actually a local authority for these purposes. If not, neither of these reliefs applies.

If the buyer is a local authority, the next question is which relief, if any, is potentially in point.

For Schedule 6A, the focus is on the reason for the acquisition or the way it is funded. A local authority purchase may qualify if it is connected with providing housing accommodation. Alternatively, it may qualify if the transaction is funded through the specified grant or financial assistance route under the Housing (Scotland) Act 1988.

This is important because the relief is not described as applying to all local authority purchases. The acquisition must fall within one of the statutory gateways.

For compulsory purchase cases under Schedule 14, the relief addresses a specific problem. The source explains that where land is acquired by a local authority under a compulsory purchase order and is then used for development by another party, there may effectively be two transactions in the overall arrangement. Without relief, LBTT could arise twice. The relief may remove LBTT from the first transaction, namely the local authority’s compulsory acquisition.

That does not mean the wider arrangement is entirely outside LBTT. The guidance is narrower than that. It says relief may be due for the first transaction, provided the conditions are met.

The reference to associated ADS means that, where the relief applies, it can also remove any Additional Dwelling Supplement that would otherwise attach to the transaction.

How to analyse it

A sensible way to approach the issue is to work through the transaction in stages.

• Who is the buyer? Confirm that the buyer is a local authority.
• What is the statutory basis for the acquisition? Is this an ordinary acquisition, a housing-related acquisition, or a compulsory purchase?
• If relying on Schedule 6A, what is the connection with housing accommodation? Is the transaction genuinely connected with the local authority’s housing provision function under the 1987 Act?
• If relying on the funding condition in Schedule 6A, is the funding in fact through the grant or financial assistance route mentioned in the source?
• If relying on Schedule 14, is there a valid compulsory purchase order and does it comply with section 189 of the 1997 Act?
• What is the planning purpose of the compulsory purchase? Is it for development, redevelopment, improvement, or another proper planning purpose within the statutory wording?
• Who is the developer? If the local authority itself is the developer, the Schedule 14 relief is not available.
• Has the relief been claimed properly in the LBTT return or by amendment within time?

In many cases, the key documents will be the acquisition papers, the compulsory purchase order if there is one, the planning and development documentation, and the funding documents. These will usually show whether the statutory conditions are actually met.

Example

A council acquires land in Scotland under a compulsory purchase order so that a private developer can carry out a redevelopment project forming part of a wider planning scheme. The order complies with the relevant planning legislation, and the developer is not the council.

On the source material, this is the kind of case where Schedule 14 relief may apply to the council’s acquisition. The point of the relief is to prevent LBTT arising on that first compulsory acquisition where the land is being assembled by the authority for development by a third party.

By contrast, if the same council acquired the land compulsorily in order to carry out the development itself, the source says the Schedule 14 relief would not be available.

Why this can be difficult in practice

The official material is brief, and some of the statutory concepts are broad.

For Schedule 6A, phrases such as “in connection with the provision of housing accommodation” can require judgement. Some transactions will clearly fall within a housing function. Others may be more indirect, and the correct analysis may depend on the exact purpose of the acquisition and the surrounding statutory powers.

The funding route can also be fact-sensitive. It is not enough that public money is involved in a general sense. The source points to funding through a grant or other financial assistance under a specific statutory provision, so the legal basis of the funding matters.

For Schedule 14, the practical difficulty is often identifying whether the compulsory purchase is truly for development by a third party, and whether the statutory planning purpose is properly documented. The source is clear that the relief is not available if the developer is the local authority, but real projects can involve mixed roles, partnership structures, or phased arrangements that make that question less straightforward than it first appears.

There is also a procedural point. Even if the substantive conditions are met, the relief must still be claimed in the LBTT return or by amendment within the amendment period. A qualifying transaction does not automatically secure relief unless the claim is made in the permitted way.

Key takeaways

• There are two separate LBTT reliefs here: one for certain housing-related local authority acquisitions from 1 April 2024, and one for certain compulsory purchase transactions.
• The reliefs do not apply to every local authority purchase. The statutory conditions, including the purpose of the acquisition and in some cases the funding route, must be met.
• For compulsory purchase relief, the developer must be a third party. If the local authority is itself the developer, the source says the relief is not available.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Relief from LBTT for Local Authorities’ Land Acquisitions and Compulsory Purch

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