Corporate Tax & Incentives

Upper Tax Tribunal upholds challenge to LBTT daily late filing penalties

LBTT (Scottish stamp duty) penalties are far more stringent than the equivalent penalties for SDLT . As well as penalties for filing late there are penalties for paying late.

For late filing the penalties are:-

  • £100 as soon as the return is late
  • £10 per day for 90 days once it is 3 months late
  • £300 or 5% of the tax after 6 months, and
  • a further £300 or 5% after 12 months.

All of these penalties are cumulative and can add up to a significant amount.

Taxpayers can challenge penalties if they have a “reasonable excuse” which can include relying on a third party such as a solicitor or tax adviser, so long as the taxpayer takes reasonable care. It is also possible to challenge penalties if Revenue Scotland, the Scottish tax authority, have not followed the statutory process for raising a penalty assessment.

Two taxpayers have recently challenged the daily penalties in both the First-Tier Tribunal and the Upper Tribunal, and their challenge was successful. The Upper Tribunal cancelled the daily penalties on fairly technical, procedural grounds.

Revenue Scotland is expected to issue an announcement soon setting out its approach to the cancellation of daily penalties by the tax tribunal. It is possible that taxpayers may be able to reclaim daily penalties if they have been charged in error. In the meantime taxpayers should consider carefully before paying any LBTT daily penalties, given the current uncertainty surrounding them.

Isobel d'Inverno

Head of Corporate Tax & Incentives at Brodies LLP
Isobel is Head of Corporate Tax & Incentives. She advises on the corporate tax aspects of company acquisitions, disposals and reconstructions, and complex commercial property transactions. Her experience includes vendor tax planning, structuring property joint ventures, LBTT and SDLT planning, the Construction Industry Scheme and employment related tax issues.
Isobel d'Inverno