The first cycle of three-yearly returns for non-residential property leases under Land and Buildings Transaction Tax (LBTT) begun on 1 April 2018. Revenue Scotland has started issuing reminder letters to tenants and you may already have received such a letter informing you of the obligation to submit further returns.
LBTT replaced Stamp Duty Land Tax (SDLT) in Scotland on 1 April 2015 and is payable on the purchase of both residential and commercial land and buildings. LBTT also applies to non-residential leases including commercial and agricultural leases. And one of the big differences with the new regime is the requirement for tenants to submit further LBTT returns to Revenue Scotland throughout the duration of the lease.
The Scottish Government, unlike the UK Government, requires leases to be reviewed for tax purposes on a regular basis over their lifetime so that the tax payable accurately reflects the amount of rent actually paid over the entire period of the lease. The amount of rent may change over the length of a lease due to factors such as extensions and rent reviews.
The first cycle of three year returns commenced on 1 April 2018. The third anniversary of the lease will usually be the date of entry and then on each subsequent third anniversary of that date. A return must be made even if there have been no changes to the rent and no further tax is payable.
If you are a tenant under a notifiable LBTT lease you need to make further returns on certain future events:
- every third anniversary of the lease
- on the assignation of the lease
- on the termination of the lease.
The need to submit three yearly returns only applies to previously notifiable LBTT leases therefore leases which were entered into under the SDLT and stamp duty regimes are not covered.
There is also no need to submit a three yearly return where the tenant had the benefit of full LBTT relief (for example group relief or charities relief) and the conditions for the relief are still met at the three yearly return dates.
It is important to ensure that you have internal systems in place to diarise your relevant return date as we will not remind you of this.
If you need advice or assistance in relation to making a return please get in touch with your usual Lindsays contact for advice.