The 3 yearly LBTT Return for Commercial Leases…
What is LBTT?
If you have entered into a lease over the last few years the chances are that your solicitor has mentioned “LBTT” to you. Land and Buildings Transaction Tax is a Scottish tax on the purchase of residential and commercial land and buildings in Scotland. LBTT also applies to non-residential leases i.e. commercial leases. LBTT is administered by the Scottish tax authority, Revenue Scotland, not HMRC as for other taxes in the UK.
How does LBTT work?
LBTT replaced Stamp Duty Land Tax from 1 April 2015 meaning that any commercial leases granted on or after this date fall within the LBTT regime. Where a lease meets certain criteria it becomes “notifiable” meaning that a return needs to be made to Revenue Scotland. Whether any tax needs to be paid in addition to a return being submitted will depend on the level of rent.
The responsibility for LBTT lies with the tenant. Therefore they will be responsible for submitting the return and paying any tax that is due. This is normally something that is handled by the solicitors acting for the tenant however the responsibility still lies with the tenant themselves.
What is a three year return?
Where a LBTT return has previously been submitted to Revenue Scotland following the grant of a lease, there is a requirement to submit a further return on every third anniversary of the “effective date”. The effective date is usually the date of entry i.e. the date you get your keys and take entry of the property. The fact that the return is due on the third anniversary of the effective date is important because the first returns are not always submitted on the effective date. You do have 30 days from the third anniversary to make the return itself however if the return is made late then a penalty will be due to Revenue Scotland.
The three year return should include an assessment of the LBTT that, on the basis of the information contained in the return, is chargeable in respect of the lease at that particular review date.
If no LBTT return was submitted when you entered into the lease then there is no requirement to submit a three year return.
What if nothing has changed after three years?
The three year returns still need to be made even if there has been no change to the rent or length of the lease. Therefore it is possible that a three year return will be made but nothing will have changed and no tax will be payable.
What do I do if I need some advice?
Contact our Commercial Property team for advice on whether you need to submit a three year LBTT return and how to go about this.
