Guidance on LBTT Sale and Leaseback Relief Conditions and Claim Process

LBTT sale and leaseback relief in Scotland

In a Scottish sale and leaseback deal, LBTT relief can apply to the leaseback if strict legal conditions are met. The relief is designed for cases where a property is sold and, as part of the same bargain, the buyer leases all or part of it back to the seller. It does not relieve the sale itself, and careful drafting is important to show that the leaseback forms part of the consideration for the sale.

• The arrangement must involve two linked land transactions: a sale of the property and a leaseback of the same property, or part of it, to the original owner.
• The leaseback must be part of the consideration for the sale, not just a separate agreement made at the same time or later.
• Any other consideration for the sale must be limited to money or the assumption, satisfaction or release of debt.
• If both parties are companies when the leaseback takes effect, the relief is blocked if they are in the same group for group relief purposes.
• The relief applies only to the leaseback transaction, and whether it is available will often depend on the wording of the sale contract, lease and any side agreements.

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LBTT sale and leaseback relief: when the leaseback can be exempt

This page explains the LBTT relief for sale and leaseback transactions in Scotland. The relief is aimed at a common commercial structure: a property is sold, and the buyer then grants a lease of the same property, or part of it, back to the seller. If the statutory conditions are met, LBTT is relieved on the leaseback transaction.

What this rule is about

A sale and leaseback arrangement usually has two linked land transactions:

• the sale of land or buildings by the original owner to the buyer, and
• the grant of a lease by that buyer back to the original owner.

Without a specific relief, both transactions could potentially fall within the LBTT rules. Schedule 3 to the Land and Buildings Transaction Tax (Scotland) Act 2013 provides relief so that, where the conditions are satisfied, the second transaction, the leaseback, is relieved from LBTT.

The policy point is straightforward: where the leaseback is part of the agreed consideration for the sale, the legislation can remove LBTT from that second step.

What the official source says

Revenue Scotland’s guidance states that sale and leaseback relief is provided by schedule 3 to the LBTT(S)A 2013. It says the relief applies to the leaseback if all three statutory conditions are met.

Those conditions are:

• 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; and
• if both parties are bodies corporate at the effective date of the leaseback, they must not be members of the same group for group relief purposes.

The guidance also makes clear that the relieved transaction is the leaseback, not the sale.

What this means in practice

The key practical question is whether the sale and the leaseback are genuinely part of one linked bargain.

For the relief to apply, the leaseback must form part of the consideration for the sale. In other words, the seller is not simply selling the property for a price and then separately negotiating a lease. The sale must be made on terms that include the buyer granting the lease back.

The second condition limits what else can count as consideration for the sale. Apart from the leaseback itself, the remaining consideration must be financial in nature: money, or debt being taken on, discharged or released. If the sale involves some other form of non-cash, non-debt consideration, the relief may not be available.

The third condition prevents the relief applying where, at the effective date of the leaseback, both parties are companies in the same group. That is an anti-avoidance style restriction built into the relief.

So in a standard third-party commercial sale and leaseback, the structure may fit the relief. In an intra-group arrangement between connected corporate entities, the relief may be blocked.

How to analyse it

A sensible way to approach the issue is to ask these questions in order:

• Are there two land transactions: a sale and a leaseback of the same property, or part of it?
• Is the leaseback part of the consideration for the sale, rather than a separate later arrangement?
• What other consideration is being given for the sale?
• Is that other consideration limited to money and/or the assumption, satisfaction or release of debt?
• At the effective date of the leaseback, are both parties bodies corporate?
• If they are, are they in the same group for the purposes of group relief?

In practice, the transaction documents matter. The sale contract, lease, and any side agreements should show clearly whether the sale is conditional on, or otherwise given in return for, the leaseback. If the documents suggest the sale and lease are independent transactions, the relief position becomes weaker.

It is also important to identify exactly what is being leased back. The guidance allows for the leaseback of all or part of the land or buildings sold.

Example

Illustration: A company sells its trading premises to an unconnected investor. As part of the same deal, the investor grants a lease of the premises back to the seller so the seller can continue trading from the site. The consideration for the sale consists of cash plus the grant of the leaseback. No non-cash assets are given, and no same-group corporate relationship exists between the parties. On the Revenue Scotland guidance, this is the type of arrangement that sale and leaseback relief is designed to cover, so the leaseback may be relieved from LBTT.

Why this can be difficult in practice

The statutory test is concise, but real transactions are often more complicated.

One difficulty is deciding whether the sale was entered into “wholly or partly in consideration of the leaseback”. That is a legal and factual question. It depends on how the bargain was structured and documented. A lease granted around the same time as the sale is not automatically enough if it was not part of the consideration for the sale.

Another difficulty is identifying whether there is any additional consideration that falls outside the permitted categories. If the seller receives something other than money, debt assumption, debt satisfaction, debt release, or the leaseback itself, the relief conditions may not be met.

The corporate grouping restriction can also require care. The guidance refers specifically to whether the parties are members of the same group for the purposes of group relief, and that test must be applied at the effective date of the leaseback.

Finally, the guidance is short and does not try to resolve every borderline case. Where the commercial arrangements are layered, conditional, or only partly documented in the main transaction papers, the analysis can become fact-sensitive.

Key takeaways

• Sale and leaseback relief under LBTT relieves the leaseback transaction, not the sale.
• All three statutory conditions must be met, including the requirement that the sale is entered into wholly or partly in consideration of the leaseback.
• The relief can be lost if there is impermissible additional consideration or, in a corporate case, if both parties are in the same group at the effective date of the leaseback.

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 Claim Process

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