Land and Buildings Transaction Tax (LBTT) replaced Stamp Duty Land Tax on 1st April 2015. As well as being the duty payable on the price or consideration for the purchase of residential and commercial land and properties in Scotland, its introduction affected taxation on the grant of non residential leases.
In circumstances where a return in relation to a lease was made to Revenue Scotland in terms of the LBTT regime, i.e. after 1st April 2015, tenants under those leases require to remember to submit further returns to Revenue Scotland. This is as a result of the requirement to update the information provided to Revenue Scotland on a three year review cycle.
It is a common misconception that if there have been no changes to the lease or indeed if no further tax is payable that no return is required. This is incorrect, a tax return must be submitted to Revenue Scotland every three years even where there are no changes which would trigger a further tax payment. If, on making the return, additional tax is payable the payment must be made at the point the LBTT return is submitted.
Consider the following scenario:
Subsidiary Co. A leased a shop unit owned by them to Commercial Trading Co. B for ten years with an option to break the lease at year five, the lease being executed on 15th of June 2015.
An LBTT return was submitted by the tenant Commercial Trading Co. B on the basis that the lease was:
- for a commercial property
- was of a duration which triggered a return (10 years) and
- payable by this commercial tenant
Commercial Trading Co. B must be aware that it has a further duty to submit another return to Revenue Scotland in relation to this lease on the 3rd anniversary of the effective date of the transaction. As the original lease was executed on 15th June 2015 (the effective date) the next return falls to be made on or before 15th June 2018. Submissions can be made online using http://www.revenue.scot/ or by making a paper return. A further return will need to be made by the tenant on 15th June 2021.
It is also worthy of note that the return is required when the tenant's interest is assigned from one party to another and when a lease comes to an end either at its stated expiry date or upon a renunciation or termination date occurring.
For more information or advice on commercial leases, please do not hesitate to contact our team.