Tenants need to be alert to new Scottish property tax returns due after 1 April

Tenants need to be alert to new Scottish property tax returns due after 1 April

LBTT, the Scottish tax on property transactions, is not everyone’s cup of tea.  Land and Buildings Transaction Tax, to give it its full name, is the near-equivalent to Stamp Duty Land Tax paid in England and Wales.  Whilst in many ways it simply replicates SDLT, there are some important differences.

One of those concerns tax returns for commercial leases, specifically the number of returns a tax payer must file with Revenue Scotland.

In England and Wales tenants generally need to submit a single tax return at the start of an SDLT qualifying commercial lease with additional returns only if there is (broadly) a change in the amount of rent being paid.

In Scotland a multitude of tax returns are required for an LBTT qualifying commercial lease: on the extension of a lease, on the transfer of a tenant’s interest in a lease or upon the end of a lease.  The fines for not remembering to file tax returns are substantial: an automatic £100 if the tax is one day late, rising to £1,000 if the return is six months late.  Oh, and interest too.

The tax return most likely to catch tenants out, though, is the one that must be submitted on every third anniversary of the start date of the lease.  Since LBTT was introduced on 1 April 2015, this means that some tenants will very soon have to start filing tax returns.  If they don’t, the above penalties apply (plus interest on late payment of tax).

It is not immediately obvious why the Scottish Government planned the administration of the tax in this way.  No doubt, demanding tenants to file extra tax returns helps Revenue Scotland know when additional LBTT is due.  It does seem, though, an unnecessary burden to impose on tax payers, particularly for small and medium size businesses which may not have the resources to keep track of when these three yearly tax returns are due.  Whilst Revenue Scotland have said they will remind tenants when to file these returns, they will do so for a limited period only.

In any event, the practical steps tenants of commercial properties in Scotland need to take are:

  • check if your lease started after 1 April 2015
  • if so, check if you have already paid any LBTT on it
  • if so (and if you have not yet done so), make a note of every third anniversary of the start date of the lease (usually referred to as the “date of entry” in the lease)
  • download the relevant form from Revenue Scotland here and submit your return

For our clients we can upon request prepare the relevant tax returns on their behalf – please e-mail me or my colleague, Michael Dewar (michael.dewar@ccwlegal.co.uk), if you would like us to do this for you.


Kieran Reilly, Solicitor (kieran.reilly@ccwlegal.co.uk)