If you are a tenant under a Scottish lease which is subject to Land and Buildings Transaction Tax (LBTT), the Scottish almost-equivalent to SDLT, you may have a duty to submit further LBTT returns throughout the duration of the lease.


When LBTT replaced SDLT in Scotland on 1 April 2015, several changes were made to the taxation of commercial leases. One significant change was the requirement for tenants to submit multiple returns throughout the duration of the lease.

Tenants falling within the LBTT regime are required to submit further returns within 30 days of:

  • every third anniversary of the 'Relevant Date' included in the initial return for an LBTT lease;
  • an assignation of the lease; and
  • the lease ending.

The first three year returns will begin falling due from 1 April 2018 and Revenue Scotland is currently developing the specific LBTT returns to be used. Assignations and lease terminations occurring before the further returns "infrastructure" is put in place can be reported using interim workarounds.

The duty to submit further returns applies to most leases that fall within the LBTT regime.

What is involved in the further LBTT returns?

For each further return, the tenant must recalculate the LBTT payable on the rent under the lease, taking into account any changes to rent (or estimated rent used in earlier returns) and duration since the date of the previous return (e.g., through a rent review or by way of Turnover Rent).

The LBTT rates and bands used are those in force when the lease was granted. So if the applicable rates of LBTT rise over the course of a lease, this should not (by itself) trigger any additional LBTT charges.

What if you have taken assignation of a lease?

Incoming tenants may be liable to submit further returns, depending on how the assignation itself is taxed for LBTT purposes.

  • On the ordinary assignation of an SDLT or stamp duty lease, the rents payable under the lease will not be subject to LBTT, so there will be no further returns required by the tenant.
  • On the ordinary assignation of an LBTT lease (i.e. one commencing post 1 April 2015), an incoming tenant will inherit the LBTT position of the outgoing tenant.
  • The outgoing tenant must submit an assignation return accounting for any changes to the LBTT position up to the date of assignation.
  • The incoming tenant will be responsible for any further returns from that date, and for any changes from the LBTT position set out in the assignation return.
  • The timetable for three yearly returns will follow on from the initial return (or last three yearly return) submitted by the outgoing tenant.
  • Incoming tenants should fully check the outgoing tenant's LBTT position as part of their due diligence to ensure they can comply with any inherited reporting obligations.

In some cases the assignation of an LBTT or SDLT lease will be treated as the grant of a new LBTT lease by the outgoing tenant to the incoming tenant.

In these cases, the incoming tenant does not step in to the outgoing tenant's shoes. Instead, they may be required to submit an initial LBTT return on the basis of the passing rents under the remaining term of the lease. Any obligations to submit further returns (including the timing of three yearly returns) will flow from the new return submitted by the incoming tenant.

What do you need to do?

Our understanding is that Revenue Scotland will send reminders to tenants approximately three months before the three-yearly return requires to be submitted. You may have already received such a reminder.

Revenue Scotland have also published new guidance on leases, including on three yearly returns, available here: https://www.revenue.scot/land-buildings-transactio....

Despite this, you should ensure that you have internal systems in place to remind you of your three yearly reporting obligations.

Additionally, you should ensure that you maintain records which provide you with the information required to submit further returns.

Brodies would be delighted to steer you through this process (and submit the relevant returns on your behalf) so please don't hesitate to get in touch to discuss further.

Blog co-written by Claire Withers and Bob Langridge.