Revenue Scotland LBTT: Guidance on Deferring LBTT Payment for Contingent or Uncertain Consideration
Principles and Concepts of Deferring LBTT Payment
This page provides guidance on deferring the payment of Land and Buildings Transaction Tax (LBTT) in Scotland. It focuses on situations where the consideration is contingent or uncertain.
- Explains the process for applying to defer LBTT payment.
- Details conditions under which payment deferral is applicable.
- Clarifies the terms ‘contingent’ and ‘uncertain’ consideration.
- Outlines the necessary documentation for application.
Read the original guidance here:
Revenue Scotland LBTT: Guidance on Deferring LBTT Payment for Contingent or Uncertain Consideration
Understanding the Deferral of Land and Buildings Transaction Tax (LBTT) in Scotland
When purchasing property in Scotland, buyers are often required to pay the Land and Buildings Transaction Tax (LBTT). However, there are certain situations where the payment of this tax can be deferred. This article will explore the concept of deferring LBTT, the conditions under which it can be applied, and the process involved.
What is LBTT?
LBTT is a tax applied to land and property transactions in Scotland. It replaced the UK Stamp Duty Land Tax (SDLT) in Scotland on 1 April 2015. The tax is progressive, meaning that the amount payable increases with the value of the property or land being purchased. The rates and thresholds for LBTT are set by the Scottish Government and can vary over time.
When Can LBTT Payment Be Deferred?
There are specific circumstances under which a buyer can apply to defer the payment of LBTT. This typically occurs when the consideration for the transaction is either contingent or uncertain. Let’s break down these terms:
- Contingent Consideration: This refers to a situation where the payment depends on a future event. For example, if the purchase price of a property is dependent on the future performance of a business, this would be considered contingent.
- Uncertain Consideration: This occurs when the exact amount to be paid is not known at the time of the transaction. An example could be a property purchase where the final price depends on a future valuation.
In these cases, the buyer can apply to defer the LBTT payment until the consideration becomes certain or the contingency is resolved.
How to Apply for LBTT Deferral
To apply for a deferral of LBTT, the buyer must submit an application to Revenue Scotland. The application should include details of the transaction and the reasons for the deferral request. It is important to provide comprehensive information to support the application, as this will help Revenue Scotland in making a decision.
For more detailed guidance on the application process, you can visit the official Revenue Scotland page on deferring LBTT payment.
What Happens After the Application?
Once the application is submitted, Revenue Scotland will review the details provided. If the application is approved, the buyer will be notified of the deferral and any conditions that may apply. It is important to note that even if a deferral is granted, the buyer is still required to submit an LBTT return by the filing deadline.
When the consideration becomes certain or the contingency is resolved, the buyer must inform Revenue Scotland and pay the outstanding LBTT amount. Failure to do so could result in penalties and interest charges.
Examples of LBTT Deferral
To better understand the concept of LBTT deferral, let’s look at a couple of examples:
Example 1: Contingent Consideration
Imagine a scenario where a company is purchasing a piece of land for the development of a new office building. The purchase price is set at £1 million, but an additional £200,000 is contingent upon the company securing planning permission for the development. In this case, the company can apply to defer the LBTT payment on the £200,000 until the planning permission is granted.
Example 2: Uncertain Consideration
Consider a situation where an individual is buying a commercial property with a purchase price that depends on the future rental income generated by the property. The initial payment is £500,000, with a further amount to be determined based on rental income over the next two years. The buyer can apply to defer the LBTT payment on the additional amount until the rental income is known.
Benefits of LBTT Deferral
Deferring LBTT can provide financial flexibility for buyers, allowing them to manage their cash flow more effectively. By delaying the tax payment until the consideration is certain, buyers can avoid paying tax on amounts that may not materialise.
However, it is important for buyers to carefully assess their situation and ensure that they comply with all requirements set by Revenue Scotland. Proper planning and communication with Revenue Scotland can help avoid any potential issues or penalties.
Conclusion
Deferring the payment of LBTT can be a valuable option for buyers dealing with contingent or uncertain consideration. By understanding the conditions and process for deferral, buyers can make informed decisions and manage their tax obligations effectively.
For more information on LBTT and the deferral process, visit the official Revenue Scotland website at Revenue Scotland LBTT Guidance.
Useful article? You may find it helpful to read the original guidance here: Revenue Scotland LBTT: Guidance on Deferring LBTT Payment for Contingent or Uncertain Consideration
If you think you’ve paid too much stamp duty, I might be able to help you reclaim it.
