Understanding LBTT: When Contingency Ceases or Consideration is Ascertained

Land and Buildings Transaction Tax (LBTT) is a tax applied to land transactions in Scotland. It is important for individuals and businesses involved in property transactions to understand the nuances of LBTT, especially when dealing with contingent, uncertain, or unascertained considerations. This article provides guidance on the LBTT return process when such considerations become known.

What is LBTT?

LBTT is a tax that replaced the UK Stamp Duty Land Tax (SDLT) in Scotland on 1 April 2015. It is payable on land and property transactions over a certain value. The tax is progressive, meaning that the rate increases with the value of the property.

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

Contingent, Uncertain, or Unascertained Considerations

In some property transactions, the consideration (or price) may not be fixed at the time of the transaction. Instead, it might depend on future events or conditions. This is known as contingent, uncertain, or unascertained consideration.

For example, a buyer might agree to pay additional money if certain planning permissions are granted. Until these conditions are met, the exact amount payable remains uncertain.

When Contingency Ceases or Consideration is Ascertained

When the contingent event occurs or the uncertain amount becomes known, the consideration is said to be ascertained. At this point, the taxpayer must submit a further LBTT return to Revenue Scotland.

This further return ensures that the correct amount of tax is paid based on the actual consideration rather than an estimated or provisional amount.

Submitting a Further LBTT Return

When the consideration becomes known, the taxpayer is required to submit a further LBTT return. This return must be made within 30 days of the date the consideration is ascertained.

Here’s a step-by-step guide to submitting a further LBTT return:

1. Determine the date when the consideration became known.
2. Calculate the total consideration, including any additional amounts now due.
3. Complete the LBTT return form, ensuring all details are accurate.
4. Submit the form to Revenue Scotland within 30 days.
5. Pay any additional tax due based on the new consideration.

For more guidance on submitting LBTT returns, visit the Revenue Scotland guidance page.

Penalties for Late Submission

Failure to submit the further LBTT return within the 30-day window can result in penalties. These penalties can increase the longer the return is delayed. Therefore, it is in the taxpayer’s best interest to act promptly once the consideration is ascertained.

For more information on penalties, you can refer to the Revenue Scotland penalties page.

Examples of Contingent Considerations

To better understand how contingent considerations work, let’s look at a few examples:

Example 1: Planning Permission

A developer agrees to purchase a piece of land for £500,000, with an additional £100,000 payable if planning permission for a housing development is granted. Initially, the LBTT is calculated on the £500,000. Once planning permission is granted, the additional £100,000 becomes payable, and a further LBTT return is required.

Example 2: Performance-Based Payments

A business buys a commercial property for £1 million, with an agreement to pay an additional £200,000 if the property generates a certain level of revenue within the first year. If the revenue target is met, the additional payment becomes due, and the business must submit a further LBTT return.

Conclusion

Understanding the requirements of LBTT when dealing with contingent, uncertain, or unascertained considerations is essential for anyone involved in property transactions in Scotland. By ensuring that further LBTT returns are submitted promptly when considerations become known, taxpayers can avoid penalties and ensure compliance with tax regulations.

For more comprehensive guidance, visit the Revenue Scotland website.