Relief from LBTT for Local Authorities on Housing and Compulsory Purchases
LBTT relief for local authority property purchases in Scotland
Local authorities can sometimes claim relief from Land and Buildings Transaction Tax (LBTT), and in some cases the Additional Dwelling Supplement (ADS), when buying land or buildings in Scotland. There are two separate reliefs: one for certain housing-related acquisitions or purchases funded under specific housing legislation, and another for some compulsory purchase cases involving a third-party developer. Relief is not automatic and must be claimed correctly in the LBTT return or by amendment in time.
- From 1 April 2024, Schedule 6A can give relief where a local authority buys property for the provision of housing accommodation or where the purchase is funded by grant or other financial assistance under section 2 of the Housing (Scotland) Act 1988.
- Schedule 6A relief can cover both LBTT and any related ADS, but only if the statutory conditions are met.
- Schedule 14 is a separate relief for some compulsory purchase transactions where a local authority acquires land under a compliant compulsory purchase order for planning or development purposes.
- For compulsory purchase relief, the development must be carried out by a genuine third party, not by the local authority itself.
- When checking eligibility, key points include who the buyer is, why the land is being acquired, whether the statutory housing or funding link exists, and whether any compulsory purchase order meets the legal requirements.
- Even if relief applies, it must be claimed in the original LBTT return or by amending the return within the allowed amendment period.
Scroll down for the full analysis.
Read the original guidance here:
Relief from LBTT for Local Authorities on Housing and Compulsory Purchases
LBTT relief for certain local authority acquisitions, including some compulsory purchases
This page explains when a local authority can claim relief from Land and Buildings Transaction Tax (LBTT), and from the Additional Dwelling Supplement where relevant, on certain land purchases in Scotland. The source material covers two separate reliefs: one for qualifying local authority acquisitions connected with housing, and another for some compulsory purchase cases. The conditions are important, because the relief is not available for every purchase by a local authority.
What this rule is about
LBTT normally applies when land or buildings are acquired in Scotland. The legislation gives special relief in some situations where a local authority is the buyer.
The official material refers to two different statutory routes:
- Schedule 6A to the Land and Buildings Transaction Tax (Scotland) Act 2013, which applies from 1 April 2024 and gives relief for certain acquisitions by local authorities.
- Schedule 14 to the same Act, which deals separately with certain compulsory purchase transactions.
These are different reliefs with different conditions. A reader should not assume that because a local authority is buying the property, relief automatically applies.
What the official source says
Under Schedule 6A, relief is available where the buyer is a local authority and one of two qualifying conditions is met.
- The transaction is in connection with the provision of housing accommodation, by reference to section 2 of the Housing (Scotland) Act 1987.
- 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 covers LBTT and associated ADS, and that it has effect from 1 April 2024.
Separately, Schedule 14 provides relief for certain compulsory purchases. The source explains that this is aimed at cases where a local authority acquires property under a compulsory purchase order and the land is intended for development by someone else, usually a developer. In that type of arrangement there may effectively be two transactions, and without relief LBTT could arise twice. The relief may remove LBTT on the first transaction.
For the compulsory purchase relief, the source says the conditions include:
- the purchase is by a local authority
- the purchase is through a compulsory purchase order
- the order complies with section 189 of the Town and Country Planning (Scotland) Act 1997
- the acquisition is for the development, redevelopment or improvement of land, or for another purpose required in the interests of the proper planning of an area
- the developer is a third party
The source expressly says that if the developer is the local authority itself, this compulsory purchase relief is not available.
The source also explains how relief must be claimed. Under Part 3, section 27(2) of the LBTT legislation, the claim must be made either:
- in the original LBTT return, or
- by amending the return within the amendment period.
What this means in practice
The practical starting point is to identify which relief, if any, is relevant.
If a local authority is buying land or buildings for housing-related purposes, the Schedule 6A relief may be the main one to consider. The key question is whether the transaction is sufficiently connected with the provision of housing accommodation, or whether the funding condition based on grant or other financial assistance is met.
If the transaction involves a compulsory purchase order, especially where land is being assembled so that a third-party developer can carry out development, redevelopment or improvement, the Schedule 14 relief may be relevant instead.
This matters because the legal basis for the claim affects what facts must be checked and evidenced. A conveyancer or tax adviser should be clear about:
- who the buyer is
- why the land is being acquired
- whether the acquisition is linked to statutory housing functions
- whether there is grant or financial assistance under the legislation referred to in the source
- whether the acquisition is under a compliant compulsory purchase order
- whether any onward development is to be carried out by a third party rather than the local authority itself
The source also makes clear that relief is not automatic. It must be claimed in the return, or by amendment within the allowed period. If the return is filed without the claim and the amendment window is missed, the practical ability to secure the relief may be lost.
How to analyse it
A sensible way to approach these transactions is to work through the following questions.
1. Is the buyer a local authority?
Both reliefs described in the source depend on the buyer being a local authority. If the buyer is another public body, a registered social landlord, a development vehicle, or a company owned by a local authority, that is not the same as the local authority itself unless the legislation clearly treats it as such. The source does not extend the relief beyond the local authority buyer.
2. Which relief is potentially in point?
If the transaction is a straightforward acquisition connected with housing accommodation or qualifying funding, look first at Schedule 6A. If the transaction is a compulsory purchase for planning or development purposes, particularly involving a third-party developer, consider Schedule 14.
3. For Schedule 6A, what is the housing connection?
The source ties the first qualifying condition to the provision of housing accommodation under section 2 of the Housing (Scotland) Act 1987. In practice, this means the purpose and context of the acquisition matter. You would usually want to identify the housing function being exercised and how the transaction connects to it.
4. For Schedule 6A, does the funding route satisfy the second condition?
The source says relief may also apply where funding for the transaction is through a grant or other financial assistance under section 2 of the Housing (Scotland) Act 1988. That points to the source and legal basis of the funding, not just the fact that public money is involved. The statutory footing of the assistance should be checked carefully.
5. For Schedule 14, is there a valid compulsory purchase structure?
The acquisition must be through a compulsory purchase order, and the order must comply with section 189 of the Town and Country Planning (Scotland) Act 1997. The planning purpose behind the order is therefore central.
6. Who is actually carrying out the development?
This is critical for the compulsory purchase relief. The source says the developer must be a third party. If the local authority is itself the developer, the relief is not available.
7. Has the relief been claimed properly?
Even if the facts support relief, the claim still needs to be made in the LBTT return or by amendment within the amendment period.
Example
Illustration: A local authority acquires land in Scotland to support the provision of housing accommodation as part of its statutory housing functions. If the acquisition falls within the condition described in Schedule 6A, the local authority may be able to claim relief from LBTT and any associated ADS, provided the claim is included in the LBTT return or made by amendment in time.
By contrast, suppose a local authority acquires land under a compulsory purchase order so that a private developer can carry out redevelopment of the site. If the order meets the planning requirements referred to in the source, the developer is a genuine third party, and the other conditions are met, relief under Schedule 14 may be available for the local authority’s acquisition. If the local authority were going to carry out the redevelopment itself, the source indicates that this compulsory purchase relief would not apply.
Why this can be difficult in practice
The source material is short, but the underlying issues can be quite fact-sensitive.
First, phrases such as “in connection with the provision of housing accommodation” are broad enough to raise boundary questions. Some acquisitions will clearly qualify, but others may be more indirect. For example, the closer the transaction is to the actual provision of housing accommodation, the stronger the case is likely to be. The source does not spell out the outer limits.
Second, the funding condition depends on grant or other financial assistance under a specific statutory provision. In practice, funding arrangements can be layered or mixed. It may not always be obvious whether the transaction is funded in the way the legislation requires.
Third, in compulsory purchase cases, the legal and commercial structure matters. The relief is aimed at cases where the local authority acquires land under compulsory purchase powers and another party undertakes the development. If the local authority retains too much of the development role, or if the third-party status is unclear, the position may be less straightforward.
Finally, the claim process should not be overlooked. A technically valid relief can still be missed if it is not claimed in the return or within the amendment period.
Key takeaways
- There are two separate LBTT reliefs here: one for certain local authority acquisitions connected with housing or qualifying funding, and another for some compulsory purchase cases.
- 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.
- Relief must be claimed in the original LBTT return or by amendment within the amendment period.
This page was last updated on
Useful article? You may find it helpful to read the original guidance here: Relief from LBTT for Local Authorities on Housing and Compulsory Purchases
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