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

4. Withdrawal of Relief

4.1 In certain circumstances, where qualifying conditions cease to be met after the effective date of the transaction and within the control period, relief may be withdrawn and the relevant amounts repaid to Revenue Scotland. Withdrawal provisions similarly apply to other LBTT reliefs, for example, group relief and reconstruction relief.

4.2 The Scottish Government intends for relief to be withdrawn where qualifying Green Freeport land, which was the subject of a qualifying transaction, and for which relief was claimed, ceases to be used in a qualifying manner. This is to ensure that the arrangements for the relief help to promote long-term investment in underdeveloped tax sites with economic potential, in line with the policy aims and the wider Green Freeport programme objectives.

4.3 For example:

• a. On 1 May 2025, Company A purchases land within a tax site which it intends to use in a qualifying manner. 100% relief is claimed.
• b. On 1 August 2025, Company A revises their plans and begins developing the land for residential use.
• c. Relief is therefore withdrawn.

4.4 For clarity, the Scottish Government does not intend to withdraw relief where:

• a. Land ceases to be used in a qualifying manner due to circumstances that are unforeseen and beyond the buyer's control;
• b. Land is intended to be used in a qualifying manner and reasonable steps are being taken to ensure that the land is used in that manner; or
• c. Land ceases to be used in a qualifying manner outwith the control period.
  

4.5 For example:

• a. On 1 May 2025, Company B purchases a warehouse within a tax site which will be used in a qualifying manner. 100% relief can be claimed.
• b. On 1 May 2027, the warehouse is irreparably damaged by a fire and is subsequently demolished.
• c. The land remains vacant until it is sold by Company B on 1 August 2028.

4.6 In this scenario, the land ceased to be used in a qualifying manner within the control period and was sold outwith the control period.

4.7 As the land ceased to be used in a qualifying manner for reasons outside of Company A's control, relief is not withdrawn.

4.8 Relevant provisions are set out at paragraph 8 of schedule 16D, set out in Annex A. The draft provisions set out those circumstances where relief may be withdrawn, and those circumstances where relief is not withdrawn.

Questions

24. Do you agree that the provisions as drafted achieve the policy intent of providing for withdrawal of relief where land ceases to be used in a qualifying manner?

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

Control Period

4.9 For the purposes of considering whether relief should be withdrawn, a 'control period' will apply. During the control period, relief claimants must demonstrate that they continue to meet the conditions for relief.

4.10 This use of a control period assists the Scottish Government in ensuring that broader programme objectives continue to be met, post-investment.

4.11 The control period will be the shorter of:

• a. Three years beginning with the effective date of the transaction; or,
• b. The period beginning with the effective date of the transaction and ending with the date the buyer, or person connected to the buyer, ceases to hold a chargeable interest in the qualifying Green Freeport land.

4.12 Depending on the effective date of the transaction, the control period may end after the 5-year period in which relief is available.

4.13 If land ceases to be used in a qualifying manner outwith the control period, the relief will not be withdrawn as long as it was used for a qualifying manner throughout the duration of the control period relevant to the transaction. This helps to ensure that the relief is properly targeted.

4.14 Relevant provisions are set out at paragraph 9 of schedule 16D, set out in Annex A. The provisions define the 'control period', including the definition of a 'final transaction', that being a transaction where, immediately after the effective date of the transaction, neither the buyer, nor person connected with the buyers, holds a chargeable interest in the qualifying Green Freeport land.

Questions

26. Do you agree that the provisions as drafted reflect the intended definition of a 'control period'?

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

Part-disposal of an interest in qualifying Green Freeport land within the control period

4.15 Where part of an interest in qualifying land is disposed of during the control period, the Scottish Government's intent is that relief attributable to the tax liability on the proportion of land that has not been disposed of should not be withdrawn provided the remaining land continues to meet all relevant conditions.

4.16 The retained interest will continue to be subject to the control period and withdrawal provisions.

4.17 Should the retained interest cease to be used in a qualifying manner within the control period, the entire relief claimed in the original return will be withdrawn.

4.18 Relevant provisions are set out at paragraph 10 of schedule 16D as set out at article 2(5) of the draft Order attached at Annex A.

Questions

28. Do you agree that the provisions as drafted achieve reflect the policy intent of how part disposals are treated?

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

Lease assignations outwith the relief period

4.19 Where a lease, against which relief has been claimed, is assigned after the date relief ceases to be available, the Scottish Government's intent is to treat that assignation as the grant of a new lease. This will bring the new lease into scope of schedule 19 of the LBTT Act.

4.20 Relevant provisions are set out at article 2(6) of the draft Order set out in Annex A. The provisions will amend paragraph 27(3) of schedule 19 of the LBTT Act to make reference to new schedule 16D.

Questions

30. Do you agree that the provisions as drafted work as intended to treat the assignation of a lease, against which relief has been claimed, as the grant of a lease?

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

32. Are there other aspects of lease transactions which the Scottish Government should give further consideration to in providing for this relief?