Guide to Connected Persons Under Land and Buildings Transaction Tax Act

LBTT connected persons rules in Scotland

For LBTT, whether people or entities are “connected persons” can affect how a property transaction is taxed. Scotland’s LBTT rules do not contain a full definition of connected persons themselves, but instead use rules from the Corporation Tax Act 2010. This can affect market value treatment, linked transactions, reliefs, partnership rules and some lease rules, so the issue should be checked early in any transaction.

• Connected persons rules can apply to individuals, companies, trustees and partners, and the result depends on the exact legal relationship involved.
• In company cases, the main question is control, which can include share ownership, voting rights, rights to income or assets, future rights, and rights attributed from associates or other companies.
• For individuals, the rules cover spouses, civil partners, siblings, parents, grandparents, children and grandchildren, as well as some in-law relationships.
• Trust and partnership cases can be easy to overlook, although there is an important exception for genuine commercial dealings in partnership assets.
• Being connected does not automatically increase LBTT, but it may change whether market value applies, whether transactions are linked, or whether a relief is available or withdrawn.

Scroll down for the full analysis.

LBTT and connected persons: what the definition means and why it matters

This page explains how Land and Buildings Transaction Tax in Scotland decides whether people, companies, trustees and partners are “connected persons”. That matters because the connected persons rules are used in several important parts of LBTT, including market value rules, linked transactions, certain reliefs, partnerships and leases. The LBTT legislation does not create a full standalone definition. Instead, it imports the definition from the Corporation Tax Act 2010, which makes this an area where the answer can be technical and fact-sensitive.

What this rule is about

Section 58 of the Land and Buildings Transaction Tax (Scotland) Act 2013 applies the connected persons rules in section 1122 of the Corporation Tax Act 2010 for various LBTT purposes. Those purposes include:

• when a transaction is treated as substantially performed
• when market value is substituted for the actual consideration in a transaction involving a connected company
• some exceptions from that market value rule
• whether transactions are linked
• parts of the chargeable consideration rules
• some reliefs, including relief for certain acquisitions of residential property, multiple dwellings relief withdrawal rules, alternative finance investment bond relief and sub-sale development relief
• partnership rules
• certain lease provisions involving loans or deposits

In practical terms, the connected persons question often sits in the background of a larger LBTT issue. A buyer or adviser may think the main issue is price, relief, lease consideration or whether transactions are linked. But before reaching the tax result, it may be necessary to ask whether the parties are connected.

What the official source says

The Revenue Scotland material says that LBTT relies on the Corporation Tax Act 2010 definition of connected persons, mainly section 1122, with support from sections 1123, 450, 451 and 448.

The broad effect of those provisions is as follows.

A company is connected with another company if, broadly, the same person controls both, one person controls one and connected persons control the other, one person together with connected persons controls the other, or the same group or a sufficiently similar group controls both.

A company is connected with an individual or other person if that person controls the company, or that person together with connected persons controls it.

Individuals are connected if they fall within the statutory family relationship rules. These include spouses and civil partners, relatives, spouses or civil partners of relatives, relatives of a spouse or civil partner, and spouses or civil partners of those relatives.

For this purpose, “relative” is narrower than some readers expect. Section 1123 says it means a brother, sister, ancestor or lineal descendant. That covers, for example, parents, grandparents, children and grandchildren, but not every wider family relationship.

Trustees are connected with certain settlors, persons connected with those settlors, and certain close companies or non-UK resident companies involving the trustees as participators. There are also special rules for principal settlements and sub-fund settlements.

Partners are connected with the other partners, and with the spouse, civil partner and relatives of any individual partner. But the source also states an important qualification: this does not apply in relation to acquisitions or disposals of partnership assets under genuine commercial arrangements.

The legislation also says that if A is connected with B, then B is connected with A.

For company cases, “control” is crucial. Sections 450 and 451 CTA 2010 say that a person controls a company if they exercise, can exercise, or are entitled to acquire direct or indirect control over its affairs. In particular, control may exist through ownership or rights over:

• the greater part of the share capital or issued share capital
• the greater part of the voting power
• the greater part of income distributions
• the greater part of assets available on a winding up or other distribution

Control is not limited to rights currently held outright. Future rights can count. Rights held by nominees or persons acting on another’s behalf can be attributed to the real controller. Rights of associates and controlled companies may also be attributed in working out control.

For these attribution rules, “associate” has its own definition in section 448. It includes relatives, partners and certain trustees and personal representatives. The meaning of “relative” in section 448 is not identical to the meaning used in section 1123, so care is needed when moving between the connected persons rule and the control attribution rule.

What this means in practice

The practical point is that connectedness under LBTT is often wider than a simple “close family” or “same owner” test.

For individuals, the rules go beyond spouses and children. They also draw in siblings, ancestors, descendants and certain in-laws.

For companies, the test is not just legal ownership of shares. It can include voting power, rights to income, rights on a winding up, future entitlements, and rights attributed from associates or other companies.

For trustees and partnerships, the rules can bring in relationships that are easy to miss if you only look at the named buyer and seller.

This matters because once parties are connected, the LBTT consequences may change. Depending on the provision in point, connected status may affect whether market value is used instead of the actual price, whether transactions are linked, whether a relief is available or withdrawn, or how partnership and lease rules apply.

It also means that the connected persons analysis should usually be done early. If it is left until the end of the transaction, the tax treatment may need to be revisited.

How to analyse it

A sensible way to approach the issue is to work through the following questions.

• Which LBTT rule are you applying? The connected persons definition is imported for specific provisions, not for every possible issue.
• Who are the relevant persons? Do not stop at the buyer and seller. Consider shareholders, participators, trustees, settlors, partners and family members where relevant.
• Is the case about individuals, companies, trustees or a partnership? The route to connectedness differs depending on the type of person involved.
• If a company is involved, who controls it? Look beyond legal title to shares. Consider voting rights, rights to distributions, rights on a winding up, and rights that can be acquired in future.
• Do attribution rules apply? Rights held by associates, controlled companies, or persons acting on someone else’s behalf may count.
• If family relationships matter, which statutory definition applies at that point in the analysis? The legislation uses different definitions in different sections.
• If a partnership is involved, is the transaction an acquisition or disposal of partnership assets under genuine commercial arrangements? If so, the usual partner connectedness rule may not apply in that context.

Where company control is in issue, it is often necessary to map the ownership and rights structure carefully rather than rely on informal assumptions about who “really owns” the business.

Example

Illustration: Anne owns enough shares and voting rights to control Company A. Her adult son owns enough shares and voting rights to control Company B. Under the connected persons rules, Anne and her son are connected individuals because he is her lineal descendant. The company rules then need to be considered. A company can be connected with another company where one person controls one company and persons connected with that person control the other. On those facts, Company A and Company B may be connected for LBTT purposes.

The practical result is not that tax automatically increases in every case. The next step is to identify which LBTT provision uses connectedness and what consequence follows under that provision.

Why this can be difficult in practice

This area is difficult because the LBTT rule points to corporation tax legislation that was not written solely for land transaction tax. The result is a definition that is detailed and cross-referenced.

There are several common sources of difficulty:

• Control is broader than majority share ownership. A person may control a company through voting rights, economic rights, rights on a winding up, or rights they are entitled to acquire later.
• Attribution rules can change the answer. Rights held by associates or by someone acting on another person’s directions may be treated as belonging to that other person.
• The word “relative” does not always mean the same thing in every linked provision. The connected persons rule and the associate rule use different formulations.
• Partnership cases need care because there is a specific carve-out for genuine commercial arrangements involving partnership assets.
• Trust structures can be especially technical, particularly where settlements, settlors, participators and corporate entities interact.

Because of that, a quick common-sense view of whether parties are “connected” may be wrong. The legal answer depends on the exact statutory route by which connectedness is established.

Key takeaways

• For LBTT, “connected persons” is mainly defined by section 1122 CTA 2010, not by a standalone LBTT definition.
• In company cases, the key issue is usually control, and control can include attributed and future rights, not just current share ownership.
• Connected status does not itself determine the tax outcome; it matters because specific LBTT provisions attach consequences to it.

Source reference: Revenue Scotland, LBTT5009 – Connected Persons, referring to section 58 LBTT(S)A 2013 and sections 1122, 1123, 450, 451 and 448 CTA 2010.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guide to Connected Persons Under Land and Buildings Transaction Tax Act

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