Welsh Revenue Authority LTT: Guidance on Land Transaction Tax Reliefs for Investment Companies in Wales

This page provides technical guidance on Land Transaction Tax (LTT) reliefs for open-ended investment companies in Wales.

• It explains the principles of LTT, a tax on property transactions.
• Details the specific reliefs available to open-ended investment companies.
• Offers guidance on how these reliefs can be applied.
• Includes information on eligibility criteria for these tax reliefs.
• Provides links to additional resources and relevant legislative documents.

Understanding Land and Buildings Transaction Tax (LBTT) in Scotland

The Land and Buildings Transaction Tax (LBTT) is a tax applied in Scotland when you buy or lease land and buildings. Introduced in April 2015, it replaced the UK-wide Stamp Duty Land Tax (SDLT) in Scotland. This article aims to provide a clear understanding of LBTT, its application, and its implications for property buyers and investors.

What is LBTT?

LBTT is a tax that applies to residential and commercial land and building transactions in Scotland. It is similar to the Stamp Duty Land Tax (SDLT) used in the rest of the UK but with some differences in rates and bands. The tax is administered by Revenue Scotland, and the funds collected contribute to public services in Scotland.

How is LBTT Calculated?

LBTT is calculated based on the purchase price of the property. The tax is structured in a progressive manner, meaning that different portions of the property price are taxed at different rates. Here are the current LBTT rates for residential properties:

• Up to £145,000: 0%
• £145,001 to £250,000: 2%
• £250,001 to £325,000: 5%
• £325,001 to £750,000: 10%
• Over £750,000: 12%

For example, if you purchase a home for £300,000, the LBTT would be calculated as follows:

• 0% on the first £145,000 = £0
• 2% on the next £105,000 (£145,001 to £250,000) = £2,100
• 5% on the remaining £50,000 (£250,001 to £300,000) = £2,500

Total LBTT = £0 + £2,100 + £2,500 = £4,600

Additional Dwelling Supplement (ADS)

If you are purchasing an additional residential property, such as a second home or buy-to-let investment, you may be liable for the Additional Dwelling Supplement (ADS). This is an extra 4% on the total purchase price of the property. For example, if you buy a second home for £200,000, the ADS would be £8,000 (4% of £200,000).

LBTT for Non-Residential Properties

LBTT also applies to non-residential properties, such as commercial buildings and land. The rates for non-residential properties are as follows:

• Up to £150,000: 0%
• £150,001 to £250,000: 1%
• Over £250,000: 5%

For example, if you purchase a commercial property for £500,000, the LBTT would be calculated as follows:

• 0% on the first £150,000 = £0
• 1% on the next £100,000 (£150,001 to £250,000) = £1,000
• 5% on the remaining £250,000 (£250,001 to £500,000) = £12,500

Total LBTT = £0 + £1,000 + £12,500 = £13,500

Leases and LBTT

LBTT also applies to leases of land and buildings. The tax is calculated based on the Net Present Value (NPV) of the rent payable over the lease term. There are different rates and bands for lease transactions:

• Up to £150,000: 0%
• Over £150,000: 1%

For example, if the NPV of a lease is £200,000, the LBTT would be calculated as follows:

• 0% on the first £150,000 = £0
• 1% on the remaining £50,000 = £500

Total LBTT = £0 + £500 = £500

Reliefs and Exemptions

There are several reliefs and exemptions available that can reduce the amount of LBTT payable. Some of these include:

• First-Time Buyer Relief: This relief increases the nil rate band for first-time buyers to £175,000.
• Charities Relief: Available to registered charities purchasing property for charitable purposes.
• Group Relief: Available for transactions within a group of companies.

For a comprehensive list of reliefs and exemptions, you can visit the Revenue Scotland LBTT page.

Filing and Payment

Once a property transaction is completed, the buyer must submit an LBTT return to Revenue Scotland and pay any tax due. This must be done within 30 days of the effective date of the transaction. Failure to do so may result in penalties and interest charges.

Conclusion

Understanding LBTT is essential for anyone involved in buying or leasing property in Scotland. By knowing the rates, bands, and potential reliefs, you can better plan your property transactions and manage your financial obligations. For more detailed information, you can refer to the Revenue Scotland LBTT page.

Useful article? You may find it helpful to read the original guidance here: Welsh Revenue Authority LTT: Guidance on Land Transaction Tax Reliefs for Investment Companies in Wales

View all WRA LTT Guidance Pages Here