Land and Buildings Transaction Tax: consultation on an amendment to group relief

Introduction

Purpose

1. The purpose of this consultation is to gather views from stakeholders on a draft Scottish Statutory Instrument, intended to amend the group relief provisions in Schedule 10 of the Land and Buildings Transaction Tax (Scotland) (Act) 2013 (‘the Act’).

Background

2. LBTT which replaced UK Stamp Duty Land Tax (SDLT) in Scotland from 1 April 2015, is a tax applied to residential and non-residential land and buildings transactions (including non-residential leases) where there is an acquisition of a chargeable interest.

3. Schedule 10 of the Act makes provision for the availability of group relief. Subject to certain rules, this provides relief from LBTT for land transactions between companies within a group that would otherwise be chargeable to tax and on which tax would otherwise be payable (subsequently referred to in this consultation as a ‘land transaction’). Such a land transaction can occur for various reasons, including e.g. to compartmentalise risk, to amalgamate business activities into a single subsidiary or in relation to considerations around the granting of a security.

4. The rationale for the relief is that there is no overall change in economic interest or benefit when a land transaction occurs between companies within the group. For tax avoidance purposes, there are strict conditions regarding eligibility for the relief and a targeted anti-avoidance rule in place that allows for claw back in certain instances.

5. On 28 December 2017, Revenue Scotland published a technical bulletin on LBTT setting out Revenue Scotland’s view that where there is a transfer of property within a corporate group and there is a relevant share pledge, which means that the person holding the pledge could obtain control of the subsidiary (transferee) but not the parent (transferor) this is an ‘arrangement’ which, in accordance with paragraph 3 of schedule 10 of the Act, means that group relief would not be available and LBTT would be payable on the market value of the property transferred.

6. Following consideration of this issue, the Cabinet Secretary for Finance and the Constitution announced on 6 March his intention to bring forward secondary legislation to make clear that group relief would be available where there is a land transaction within a corporate group structure and there is a relevant extant ‘Share Pledge’.

7. In advance of that, and consistent with the Scottish Government’s approach to taxation, this consultation seeks views on a proposed draft amendment to schedule 10 of the Act. Views are sought on the detail of the legislation to ensure that it delivers the intended effect and to allow for the impact of this planned change to be considered prior to introduction.

8. Any amendment of the Act through the use of secondary legislation can only apply prospectively. The Scottish Government is aware of the points raised by stakeholder organisations in this regard and will explore whether retrospective primary legislation would be a possible option.