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LBTT Rates Announced

Posted on Oct 21, 2014 by Helen McGrath  | Tags: land and buildings transaction tax, stamp duty land tax, residential property, STDL, LBTT  | 0 Comments

On 9th October, the Scottish Government finally announced the rates and thresholds which they propose be applied to the Land and Buildings Transaction Tax (LBTT) which is to replace Stamp Duty Land Tax (SDLT) in Scotland from 1st April 2015.

As discussed in my previous blog on LBTT, unlike SDLT which applies a single rate of tax to the whole of the consideration being paid (which rate is determined by the amount of the consideration), LBTT is designed to be a ‘progressive tax’ i.e. it will apply different rates to different parts of the consideration in a similar way to income tax on your pay. 

The intention behind restructuring the tax in this way is to reduce the significance of the various tax thresholds (and the resulting distortion of the market around those thresholds) and make the tax paid more proportionate to the value of the property in question.  Some will undoubtedly benefit from the changes, while others (especially at the top end of the market) will certainly suffer.

As with SDLT, the proposed rates and thresholds will differ as between commercial and residential properties.  For sales of property, the rates and thresholds are as follows:-

Residential Properties- Consideration

LBTT Payable

Up to £135,000

 

Above £135,000 to £250,000

 

Above £250,000 to £1m

 

Above £1m

 

Commercial Properties- Consideration

LBTT Payable

Up to £150,000

 

Above £150,000 to £350,000

 

Above £350,000

 

This means that a residential property being sold for £1.2m (which would currently attract SDLT at 5% of the whole price- £60,000, or 15% is the purchaser were a corporate entity- £180,000) would be liable for LBTT as follows:-

£0           =0% LBTT on the first £135,000
£2,300   =2% LBTT on the next £115,000 (bringing the total up to £250,000)

£75,000 =10% LBTT on the next £750,000 (bringing the total up to £1m)

£24,000 =12% LBTT on the balance of £200,000

£101,300 total LBTT payable by the purchaser

The rates and thresholds of LBTT differ again when it comes to commercial leases (residential leases are generally exempt) and these are based on the ‘Net Present Value’ of the rent payable.  The calculation of NPV and the subsequent LBTT is quite complicated and will be covered in a separate blog, when we will also discuss the differences in how LBTT will be applied to leases from the current SDLT system.

If you have any queries regarding the application of LBTT or concerns as to how it may affect you, please contact a member of the MBM Commercial Property team who would be happy to assist.

Contact details can be found here.

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