Land and Buildings Transaction Tax - Green Freeports Relief: consultation on proposed legislation

2. Overview and Eligibility for the Relief

2.1 This Chapter provides commentary on the circumstances and conditions in which the proposed relief would be available for qualifying transactions. It also outlines the circumstances in which clawback provisions would apply if certain conditions are not met or maintained within a defined period following the relief being claimed.

2.2 The availability of full or partial relief will require a number of conditions to be met at the effective date of the transaction.

2.3 Full or partial relief from LBTT will be available where a buyer, or buyers, enter into a qualifying land transaction in which the relevant land or property is situated within a designated Green Freeport tax site and is used, or is intended to be used, in a qualifying manner.

2.4 To provide for a consistency of offer across the UK, the Scottish Government intends that the LBTT relief offered in Green Freeports will be broadly equivalent to the Stamp Duty Land Tax (SDLT) relief offered to Freeports in England.

2.5 The relief will be administered by Revenue Scotland in the same way as existing LBTT reliefs. The process for claiming relief is discussed in more detail in Chapter 3.

Time limits

2.6 The Scottish Government intends that relief will be available for qualifying transactions with an effective date falling within a specified period of five years, running from the coming into force date of the legislation

2.7 This ensures that the LBTT benefit offered in Green Freeports is broadly equivalent to the SDLT relief offered to Freeports in England which was also available over a five-year period.

2.8 The relevant time period will be set out in paragraphs 2(1)(b) and 3(1)(b) of the new schedule 16D.

Qualifying Green Freeport Land

2.9 For the purposes of the relief, qualifying Green Freeport land will be land:

• a. Situated within a designated Green Freeport tax site, as defined by relevant regulations laid under powers conferred by section 113 of the Finance Act 2021; and,
• b. Which the buyer intends to use in a qualifying manner (see discussion below).

2.10 These conditions must apply on the effective date of the transaction for relief to be claimed.

2.11 Relevant provisions are set out at paragraph 6 of schedule 16D, set out in article 2(5) of the draft Order attached at Annex A.

Questions

1. Do you agree that the provisions as drafted work as intended?

2. If not, what amendments would you propose to the draft legislation and on what basis?

Qualifying transaction land

2.12 Qualifying transaction land for the purposes of this relief means the chargeable interest acquired through a land transaction or contract.

2.13 Relevant provisions are set out at paragraph 5 of schedule 16D, as set out in article 2(5) of the draft Order attached at Annex A.

Questions

3. Do you agree that the provisions as drafted work as intended?

4. If not, what amendments would you propose to the draft legislation and on what basis?

Qualifying manner

2.14 Relief will be available, in part or in full, for qualifying transaction land which is used, or is intended to be used, in a 'qualifying manner'. This broadly means land or property used for a commercial activity or trade.

2.15 Use of land in a qualifying manner for the purposes of the relief will include use in one or more of the following ways:

• a. Use by the buyer, or a person connected with the buyer, in the course of carrying out a commercial trade or profession;
• b. The development, or redevelopment, of the land by the buyer, or person connected with the buyer, in the course of a commercial trade or profession;
• c. Use by the buyer, or a person connected with the buyer, in the course of carrying out a commercial trade or profession as a source of rent.

2.16 Use of land in the following ways will not be considered use in a 'qualifying manner':

• a. Use as a dwelling, or garden or grounds of a dwelling;
• b. Developed or redeveloped to become residential property;
• c. Exploited as a source of rent for a dwelling or as the garden or grounds of a dwelling;
• d. Held as stock of a business for sale or resale without development or redevelopment.

2.17 Please note that further information on these points will be provided in subsequent Green Freeport tax guidance published by Revenue Scotland.

2.18 Relevant provisions are set out at paragraph 7 of schedule 16D, as set out in article 2(5) of the draft Order attached at Annex A.

Questions

5. Do you agree that the provisions as drafted work as intended?

6. If not, what amendments would you propose to the draft legislation and on what basis?

Ancillary land

2.19 The Scottish Government intends that relief may also be claimed in respect of land which is ancillary to (i.e., providing necessary support to) land within a designated tax site and for which relief has been claimed. Examples of ancillary land could include, for example, a warehouse access road or a car park.

2.20 Relevant provisions are set out at paragraph 7(3) of schedule 16D, as set out in article 2(5) of the draft Order attached at Annex A.

Questions

7. Do you agree that the provisions as drafted work as intended?

8. If not, what amendments would you propose to the draft legislation and on what basis?

Full Relief

2.21 Where all other relevant conditions are met, the Scottish Government intends that full relief from LBTT would be available where at least 90% of the chargeable consideration (as defined in schedule 2 of the LBTT Act) for a qualifying transaction is attributable to qualifying Green Freeport land.

2.22 For example:

• a) Company A enters into a qualifying transaction with an effective date of 1 May 2025. For the purposes of this example, the effective date falls within the specific period where relief is available.
• b) 95% of the chargeable consideration relates to the lease of premises situated within a designated tax site, whereas 5% relates to the lease of a small office space within the Green Freeport boundary but outwith the designated tax site.
• c) As more than 90% of the chargeable consideration is attributable to qualifying transaction land (see paragraph 2.12), Company A is entitled to full relief.
• d) Company A must submit an LBTT return, including the amount of relief claimed within 30 days beginning with the day after the effective date of the transaction, in this case, by 1 June 2025.

2.23 Relevant provisions are set out in paragraph 2 of schedule 16D, as set out at article 2(5) of the draft Order in Annex A.

Questions

9. Do you agree that the provisions as drafted achieve the policy intent of allowing full relief for qualifying transactions where at least 90% of chargeable consideration is attributable to qualifying transaction land?

10. If not, what amendments would you propose to the draft legislation and on what basis?

Partial Relief

2.24 The Scottish Government's intent is that, where all other relevant conditions are met, partial relief will be available where less than 90% but more than 10% of the chargeable consideration for the qualifying transaction is attributable to qualifying Green Freeport land. This helps to ensure that the relieved transaction is consistent with the overall Green Freeport programme objectives.

2.25 Relief would be given in relation to the relevant proportion on a just and reasonable basis. This is discussed in more detail in Section 3 below. Claimants must be able to sufficiently evidence the basis for any just and reasonable apportionment carried out.

2.26 This approach aligns with the SDLT relief already available in Freeports in England and will help to ensure that the relief is properly targeted and allocated.

2.27 For example:

• a. Company B enters into a qualifying transaction with an effective date of 1 May 2025.
• b. 60% of the chargeable consideration relates to the lease of premises situated within a designated tax site, whereas 40% relates to the lease of office space within the Green Freeport boundary but outwith the designated tax site.
• c. As more than 10% but less than 90% of the chargeable consideration is attributable to qualifying Green Freeport land, Company B is entitled to partial relief.
• d. This is proportionate to the amount of chargeable consideration that relates to the land or property situated within the designated tax site. In this case, a 60% reduction to the LBTT liability can be claimed.
• e. Company B must submit an LBTT return setting out the amount of relief claimed within 30 days beginning with the day after the effective date of the transaction, in this case, by 1 June 2025.

2.28 Relevant provisions are set out at paragraph 3 of Schedule 16D, as set out in paragraph 2(5) of the draft Order attached at Annex A

Questions

11. Do you agree that the provisions as drafted achieve the policy intent for partial relief where between 10% and 90% of chargeable consideration is attributable to qualifying Green Freeport land?

12. If not, what amendments would you propose to the draft legislation and on what basis?

13. Are there any specific scenarios to which the Scottish Government should give careful consideration to the arrangements for partial relief?

Attributing chargeable consideration to land

2.29 As noted above in relation to the claiming of partial relief, the Scottish Government intends that the amount of chargeable consideration attributable to different elements of the subject-matter of the transaction must be determined on a just and reasonable basis, with reference to the qualifying Green Freeport land that is intended to be used in a qualifying manner.

2.30 This approach is intended to help ensure that claimants benefit from the correct amount of relief, and that any relief relates to land used in a way that helps achieve the overarching Green Freeport policy objectives.

2.31 If, for example, the relevant transaction land is wholly within a Green Freeport tax site but only 50% of the consideration is attributable to land intended to be used in a qualifying manner then relief will only be available in respect of that 50%.

2.32 Relevant provisions are set out paragraph 4 of schedule 16D of Annex A. The provisions discuss the attribution of chargeable consideration to land in the context of paragraph 6(1)(b) of schedule 16D.

Questions

14. Do you agree that the provisions as drafted achieve the policy intent of requiring just and reasonable apportionment of consideration to land?

15. If not, what amendments would you propose to the draft legislation and on what basis?

Alternative property finance arrangements

2.33 Alternative property finance arrangements are structured using contracts, or combinations of contracts, which satisfy the requirements of Shari'a law. Financial institutions in the UK offer Shari'a law-compliant alternative finance products that are economically equivalent to conventional banking products but do not involve interest or speculative returns.

2.34 Where a transaction is entered into via an alternative property finance arrangement, relief will be determined by the circumstances of the person granted an interest in land under the 'second transaction', rather than the financial institution purchasing a major interest in land under the 'first transaction'.

2.35 Withdrawal of relief will be determined by the circumstances or actions of the person granted an interest under the second transaction. Accordingly, any tax and interest liability following withdrawal of relief will be the liability of that person.

2.36 Relevant provisions are set out at paragraph 11 of schedule 16D, in Annex A. The provisions act to allow relief to apply to the 'second transaction', where all relevant conditions have been met, by providing that references to the buyer are to be treated as references to the person who has been granted an interest in land under the 'second transaction'.

Questions

16. Do you agree that the provisions as drafted work as intended in terms of the provision or withdrawal of relief under alternative finance arrangements?

17. If not, what amendments would you propose to the draft legislation and on what basis?