On 25 January 2019 the following Scottish Land and Buildings Transaction Tax (LBTT) changes came into force:

1. Changes to non-residential (i.e. commercial property) rates and bands:

Purchase price/premium LBTT rate
Up to £150,000 0%
£150,001 to £250,000 (reduction from £350,000) 1% (reduction from 3%)
Above £250,000 (reduction from £350,000) 5% (increase from 4.5%)

These changes apply to:

  • the purchase/acquisition of non-residential Scottish property; and
  • lease transactions involving non-residential Scottish property where a chargeable consideration (other than or in addition to rent) is being paid (e.g. a premium).

The overall effect of the changes is to increase the tax that is payable in relation to higher-value non-residential Scottish property.

Note that the LBTT rates and bands applicable to residential property have not changed (other than the ADS rate mentioned below).

2. Change to the Additional Dwelling Supplement:

The rate of the Additional Dwelling Supplement (ADS), which is payable on certain residential property transactions, has increased from 3% to 4%.

ADS is payable on:

  • the purchase/acquisition by individuals of additional residential properties in Scotland for £40,000 or more (e.g. buy-to-let properties and second homes); and
  • most purchases by corporate entities of any residential property in Scotland for £40,000 or more.

The rules on when ADS does and does not apply are complex so please consult us if you need more information. Note that ADS is payable in addition to the standard residential property LBTT charges.

Transitional arrangements – timing of changes:

If the effective date of a transaction (i.e. the completion date) is/was on or after 25 January 2019 BUT the contract was entered into before 12 December 2018, then generally the tax rates and bands for ADS and non-residential LBTT transactions that were in force prior to 25 January 2019 will apply.

Implementation of changes:

These changes, which were proposed in the 12 December 2018 Scottish budget, have been implemented by the Land and Buildings Transaction Tax (Tax Rates and Tax Bands etc) (Scotland) Amendment Order 2018.

Proposed new reliefs:

The December 2018 Scottish Budget also included an announcement of two proposed new LBTT reliefs in relation to:

  • the seeding (i.e. the initial transfer) of properties into Property Authorised Investment Funds (PAIFs) or Co-ownership Authorised Contractual Schemes (CoACSs); and
  • the exchange of units in CoACSs.

The aim of the proposed reliefs is to replicate the Stamp Duty Land Tax treatment of such funds in England. The Scottish government intends the new reliefs to be introduced in 2019, although there is to be further consultation once we have more clarity on the likely impact of Brexit.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.