Guidance on Recovering LBTT Group Relief When Withdrawn or Partially Withdrawn

LBTT Group Relief Withdrawal: Who Can Be Asked to Pay

If LBTT group relief is withdrawn, the buyer is normally the first person liable for the tax once the amount due has been finally determined. Revenue Scotland must issue a notice to the buyer, but if the tax remains unpaid for six months after it becomes payable, it may also seek payment from the seller, certain parent or group companies above the buyer, and some controlling directors.

• The buyer is primarily liable, and Revenue Scotland must serve a notice requiring payment within 30 days.
• The notice must be served within three years from the date the tax was finally determined and is treated like an assessment for recovery, interest and appeal purposes.
• If the tax is still unpaid after six months, Revenue Scotland may pursue the seller, a company above the buyer in the group structure, or a controlling director connected at a relevant time.
• A relevant time runs from the effective date of the transaction until the buyer stops being in the same group as the seller.
• Anyone other than the buyer who pays the tax can seek reimbursement from the buyer, but may still face immediate recovery action by Revenue Scotland.
• LBTT paid because group relief was withdrawn cannot be claimed as a tax deduction when calculating income, profits or losses.

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LBTT group relief: who can be made to pay if relief is later withdrawn

This page explains what happens after Land and Buildings Transaction Tax (LBTT) group relief has been withdrawn or partly withdrawn.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 key point is that the buyer is primarily liable for the tax that becomes due, but Revenue Scotland may in some cases recover unpaid tax from other connected persons if the buyer does not pay.

What this rule is about

Group relief can reduce or remove 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 But if the conditions for that relief later stop being met, the relief may be withdrawn in whole or in part.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 It is not mainly about whether relief should be withdrawn. It is about who is liable, how Revenue Scotland enforces payment, and when liability may extend beyond the original buyer.

What the official source says

According to the guidance, 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. The notice must:

• require payment within 30 days after the notice is served;
• be served within three years beginning with the date the tax was finally determined;
• state the amount to be paid; and
• be treated as if it were a Revenue Scotland assessment, with the tax treated as due from the person served with the notice.

The notice also has effect for recovery of the tax, any interest on the unpaid tax, and for appeal purposes.

If the tax, or part of it, remains unpaid for six months after it became payable, Revenue Scotland may then seek recovery from certain other persons. The guidance says recovery may be made from:

• 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 guidance also states that no deduction is allowed, for any tax purpose, for LBTT paid because relief was withdrawn. In other words, that payment cannot be used to reduce income, profits or losses for tax calculations.

It then defines some key terms:

• 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 is extended to include certain shadow directors and similar persons under the corporation tax rules referred to.
• Controlling director means a director who has control of the company under the corporation tax control rules.

What this means in practice

The practical starting point is simple: if group relief is withdrawn, the buyer is the first person Revenue Scotland will look to.

But the buyer is not always the only practical target. If the buyer does not pay within six months after the tax became payable, Revenue Scotland may pursue others who were sufficiently connected with the buyer and the group structure during the relevant period.

This matters because group reorganisations often involve companies with limited assets, special purpose vehicles, or companies that later leave the group. The legislation is designed to stop the tax becoming irrecoverable merely because the original buyer no longer has funds or is no longer in the group.

It also means that parent companies, sellers, and some directors may have a real financial exposure even though they were not the original buyer under the land transaction.

The rule giving a paying third party the right to recover the amount from the buyer is important, but it does not remove the immediate risk of being pursued by Revenue Scotland. It simply gives that person a legal route to seek reimbursement from the buyer afterwards.

How to analyse it

A sensible way to analyse a case is to work through these questions in order.

• Has group relief in fact been withdrawn or partly withdrawn, and has the amount of LBTT due been finally determined?
• Has Revenue Scotland served a notice on the buyer requiring payment?
• Was that notice served within the three-year period starting with the date the tax was finally determined?
• What amount of tax and interest is now unpaid?
• Has six months passed since the tax became payable?
• If so, who falls within the further recovery categories: the seller, a company above the buyer in the same group at a relevant time, or a controlling director at a relevant time?
• For any company said to be above the buyer, does the 75% subsidiary chain actually support that conclusion?
• For any individual said to be a controlling director, did that person meet the statutory control test during the relevant period?

In practice, the most important evidence is usually the group structure over time, the date the buyer ceased to be in the same group as the seller, and the control position of any directors said to be liable.

Example

Illustration: Company B buys Scottish property from Company S and claims LBTT group relief. Later, an event occurs that causes the relief to be withdrawn. The amount of LBTT due is determined. Revenue Scotland serves notice on Company B, requiring payment within 30 days.

Company B does not pay. Six months pass from the date the tax became payable. Revenue Scotland may then seek recovery not only from Company B, but potentially from Company S, from a parent company above Company B in the group structure during the relevant period, or from a director who controlled Company B or its controlling company during that period.

If the parent company pays the tax and interest, the guidance says it is legally entitled to recover that amount from Company B.

Why this can be difficult in practice

The rule sounds straightforward, but several points can be fact-sensitive.

First, timing matters. The guidance refers to several different dates: the effective date of the transaction, the date the buyer ceased to be in the same group as the seller, the date the tax was finally determined, the date the notice was served, and the date the tax became payable. A mistake about any of these dates can affect whether recovery is valid and from whom.

Second, group structure can be more complicated than it first appears. The question whether one company is above another depends on the 75% subsidiary relationship. That may require careful tracing through intermediate companies and checking the structure at the relevant times.

Third, director liability is not limited to board-appointed directors in the ordinary sense. The legislation referred to extends the meaning of director and uses a separate control test for controlling directors. That can bring in individuals who exercised real control even if their formal position was less obvious.

Fourth, the guidance states that the notice to the buyer is treated as an assessment and has effect for appeals. That means procedural rights and obligations matter. The exact scope of any challenge will depend on the underlying legislation and the facts.

Finally, the rule denying any tax deduction for the LBTT paid after withdrawal may be overlooked. A business may assume the payment is a deductible cost, but the guidance says it is not allowed for calculating income, profits, or losses for any tax purpose.

Key takeaways

• When LBTT group relief is withdrawn, the buyer is primarily liable once the tax due has been determined.
• Revenue Scotland must serve a notice on the buyer, and that notice must be served within three years from final determination of the tax.
• If the tax remains unpaid for six months after it became payable, Revenue Scotland may pursue the seller, certain group companies above the buyer, and certain controlling directors.

This page was last updated on 24 March 2026

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

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