Guidance on Deferring LBTT Payment for Contingent or Uncertain Consideration

Application to Defer Payment of LBTT

This page provides guidance on the process for applying to defer the payment of Land and Buildings Transaction Tax (LBTT) in Scotland when the consideration is contingent or uncertain. It outlines the principles and conditions under which deferral is permitted.

Explains the criteria for deferring LBTT payment.
Details the application process for deferral.
Clarifies what constitutes contingent or uncertain consideration.
Provides legal references and guidance notes.

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Read the original guidance here:
Guidance on Deferring LBTT Payment for Contingent or Uncertain Consideration

Understanding the Application to Defer Payment of LBTT

The Land and Buildings Transaction Tax (LBTT) is a tax applied to land transactions in Scotland. It is similar to the Stamp Duty Land Tax (SDLT) in England and Northern Ireland, and the Land Transaction Tax (LTT) in Wales. One of the key aspects of LBTT is the ability for buyers to apply to defer payment when the consideration is contingent or uncertain. This article aims to provide a comprehensive guide on how to navigate this process.

What is LBTT?

LBTT is a tax levied on the purchase of land and buildings in Scotland. It is payable by the buyer in a property transaction and is calculated based on the purchase price. The rates and thresholds for LBTT are set by the Scottish Government and can vary depending on the type of property and its value.

For more detailed information on LBTT, you can visit the official Revenue Scotland website.

When Can You Defer Payment?

Deferring payment of LBTT is an option available to buyers when the consideration for the property is contingent or uncertain. This means that the full amount payable is not known at the time of the transaction. Common scenarios include:

When the purchase price depends on future events, such as the completion of certain works on the property.
When part of the payment is linked to the performance of the property, such as rental income.

In these cases, buyers can apply to defer the payment of LBTT until the consideration becomes certain.

How to Apply for Deferral

The process of applying for a deferral involves several steps:

1. Submit an LBTT Return

Even if you intend to defer payment, you must still submit an LBTT return to Revenue Scotland. This return should include all known details of the transaction, including any contingent or uncertain amounts.

2. Calculate the Provisional LBTT

You need to calculate the provisional LBTT based on the known consideration. This is the amount you will pay initially, with the understanding that the final amount may change once the consideration is certain.

3. Apply for Deferral

To apply for deferral, you must complete the relevant section of the LBTT return. This includes providing details of the contingent or uncertain consideration and explaining why deferral is necessary.

4. Pay the Provisional Amount

Once your application is submitted, you must pay the provisional LBTT amount. Revenue Scotland will review your application and confirm whether deferral is granted.

Examples of Contingent or Uncertain Consideration

To better understand when deferral might be applicable, consider the following examples:

Example 1: Property Development

A developer purchases a plot of land with the intention of building residential properties. The purchase price includes a base amount plus an additional sum contingent on the successful sale of the completed properties. Since the final consideration depends on future sales, the developer can apply to defer part of the LBTT.

Example 2: Commercial Lease

A company leases a commercial property with a rent that varies based on the turnover of the business. The initial rent is known, but future payments depend on business performance. The company can apply to defer LBTT on the uncertain portion of the rent.

Review and Adjustment

Once the consideration becomes certain, you must submit an amended LBTT return to Revenue Scotland. This return should reflect the final amount of consideration and any additional LBTT payable. If the consideration is lower than initially estimated, you may be eligible for a refund.

Key Considerations

When considering deferral, keep the following in mind:

Ensure all information provided is accurate and complete to avoid penalties.
Keep records of all correspondence and calculations related to the transaction.
Consult with a tax advisor or legal professional if you are unsure about any aspect of the process.

Conclusion

Applying to defer payment of LBTT can be a valuable option for buyers dealing with contingent or uncertain consideration. By understanding the process and requirements, you can ensure compliance with tax regulations while managing your financial obligations effectively.

For further guidance, visit the official Revenue Scotland page on deferring LBTT payment.