The Scottish Parliament has approved changes to the rates of Land and Buildings Transaction Tax (LBTT) for transactions with an effective date on or after 25 January 2019. The changes will:

  1. (Generally) increase LBTT charges for non-residential property transactions; and
  2. Increase the current rate of Additional Dwelling Supplement (ADS).

The Scottish Government has also announced plans to introduce two new LBTT reliefs which will be of interest to those working in the funds industry.

Changes to the LBTT non-residential property rates

The new non-residential property rates will be:

Whilst there will be a small saving for transactions priced at under £350,000, the changes to the non-residential property rates will result in a significantly increased cost on higher value non-residential property transactions in Scotland. The changes have largely brought the LBTT rates in line with the rates of SDLT applicable to transactions in England.

For example, a £10M purchase price will now result in an LBTT charge of £488,500 (£48,250 higher than it would have been under the old rates). The equivalent SDLT charge would be £489,500.

The new rates will apply to transactions with an effective date on or after 25 January 2019, unless the contract for the transaction was entered into prior to 12 December 2018.

Additional Dwelling Supplement

The rate of ADS which, broadly, applies to second homes, buy to let properties and acquisitions of dwellings by companies has been increased from 3% to 4%. The supplement, if due, is payable in addition to the residential property LBTT charge.

The increase will also apply from 25 January 2019, with a carve out for contracts entered into prior to 12 December 2018.

Residential LBTT rates will not otherwise change.

New reliefs

Subject to the impact of Brexit, the Scottish Government has announced plans to introduce a:

  1. Relief for the ‘seeding’ of properties into a Property Authorised Investment Fund or Co-owned Authorised Contractual Scheme (CoACS); and
  2. Relief for when units in CoACS are exchanged.

A consultation is expected early this year and the intention is for these reliefs to be introduced at some point in 2019.