Anyone who has purchased a property or has taken on a tenant’s interest in a commercial lease since 1 April 2015 will likely have heard of Land & Buildings Transaction Tax (or “LBTT” for short) and may have had to pay varying amounts of tax to Revenue Scotland as a result.
One thing you may not know however, is that if you entered into a commercial lease and your lease was notifiable to Revenue Scotland for LBTT purposes, tenants must also submit Additional LBTT returns on every third anniversary of the effective date of the lease. Since we are now three years into the LBTT regime in Scotland, as of this month those very first three yearly returns will now start to become due.
How do I know if my lease is affected?
If you entered into a non-residential lease in Scotland from 1 April 2015 and your lease was for a term of more than 7 years or if less but LBTT was payable to Revenue Scotland (unless the rent is less than £1,000 per annum). Leases which were originally entered into prior to 1 April 2015 may also be affected if they were varied or extended since LBTT came into force. If your lease was for a term in excess of 7 years, this will have applied regardless of whether any tax was payable to Revenue Scotland.
Why is the Additional LBTT return required?
This is designed to pick up any changes in rent or additional premiums which have been paid in the intervening three years, which would then potentially have a bearing on the amount of LBTT due to Revenue Scotland. A common example where this will apply will be where rent has increased following a rent review. However, much like the original LBTT return at the grant of a notifiable lease as mentioned above, you must submit an Additional LBTT return to Revenue Scotland, regardless of whether additional tax is payable or not.
When does the Additional LBTT return require to be submitted by and what happens if I don’t do it?
The return requires to be submitted to Revenue Scotland within 30 days of every 3rd anniversary of the Effective Date under your lease. The Effective Date is typically the date of entry under your lease, but not always – particularly where an older lease has recently been extended – and you are therefore better to check this if you are unsure. If you do not submit the return within this timescale, you will be liable for late submission penalties and also interest on any additional unpaid tax (if applicable). It is worth remembering that Revenue Scotland will not issue a reminder to you in advance of the 30 day deadline, it is up to you to remember to put the date in the diary!
If you have any queries in respect of the LBTT Additional Returns and how your lease may be affected, please contact Craig Smith, Associate Director on 01383 745776 or firstname.lastname@example.org.