What is LBTT?

Land and Buildings Transaction Tax (LBTT) is a tax on the acquisition of interests over land in Scotland including the grant of leases. Licences to occupy fall outwith the scope of LBTT. Collection of LBTT is dealt with by Revenue Scotland (RS). Here we look at LBTT on commercial leases in Scotland.

LBTT was introduced in 2015, replacing Stamp Duty Land Tax (SDLT). The LBTT regime for leases in Scotland differs significantly from the SDLT regime in England and Northern Ireland.

LBTT is payable by the party acquiring the right. With commercial leases, that's normally the tenant. Whilst LBTT is generally a matter for tenants it can be relevant to landlords.

How is LBTT calculated?

LBTT is charged on both the rent and any non-rent consideration e.g. a premium paid by the tenant to the landlord.

LBTT on non-rent consideration is taxed at the normal LBTT rates – although the initial nil rate band will be disapplied if the annual rents are above £1,000. LBTT on rents is calculated on the 'Net Present Value' (NPV) of the rent payable. There is a statutory formula for calculating the NPV, but the idea is effectively to discount future rents to today's money (e.g. £100,000 in ten years is not worth £100,000 today). Where the total NPV falls below £150,000, no LBTT is payable on the rents, but an LBTT return may still need to be submitted.

The current rates of LBTT for rents at November 2023 are:

Up to £150,0000%
£150,001 to £2,000,0001%
Above £2,000,0002%

When is an LBTT return required?

LBTT returns are usually required on grant of a lease; every three years during the term; on assignation; and at expiry. For new leases, the initial LBTT return is usually required within 30 days the "effective date": generally the earliest of: the first rent payment; the date of entry; or the last date of lease signing.

An LBTT return may also be required on the variation or extension of a lease granted before 1 April 2015.

Initial LBTT Return

Almost every lease must be notified to RS within 30 days of the effective date by submitting an LBTT return whether or not LBTT is actually payable and paying any LBTT due. The only exceptions are for residential leases; for leases of less than 7 years and there is no LBTT payable; or for leases of 7+ years but any premium does not exceed £40,000 and the annual rent does not exceed £1,000 per annum.

Three-yearly returns

Given that leases are often subject to change (e.g. extending terms or changing rent) tenants are obliged to recalculate the amount of LBTT due every 3 years and submit a further return. These further returns take into account any changes in the amount of rent payable under the lease to ensure that the amount of LBTT paid by the tenant is correct and up to date. An LBTT return is still to be submitted even if there are no changes to the lease.


Where a lease subject to LBTT is assigned, the outgoing tenant must submit an LBTT return accounting for any changes to LBTT to the date of assignation. The assignee assumes responsibility for future three-yearly returns. If a premium is paid by the assignee, an LBTT return may also be required depending on the level of the premium. Special rules (which are beyond the scope of this article) apply where a lease on which an LBTT relief has been claimed are assigned.


When a lease comes to an end for any reason (e.g. by renunciation (surrender), irritancy (forfeiture) or simply at the end of its term), the tenant must submit an LBTT termination return and recalculate the LBTT payable for the lease term. That recalculation may result in a (significant) repayment of LBTT which the tenant can reclaim from RS.

Landlord Considerations

Whilst LBTT is largely a tenant consideration, landlords should be familiar with LBTT requirements:

Re-gears: When a further LBTT return is submitted, the LBTT is recalculated using the LBTT rates at the effective date (i.e. lease start date). Re-gears may be structured either as a lease extension and variation, or as a termination and re-grant. Depending on the LBTT rates at the effective date, either option may result in a LBTT saving for the tenant. Landlords may wish to consider the structure of such transactions early on to ensure that the parties are aligned as tenants will be mindful of at overall costs.

Enforcing the lease: Where a lease is notifiable for LBTT, the LBTT return must be submitted before the lease can be registered in the Books of Council and Session or Land Register. Registration allows the landlord to enforce the tenant's financial obligations using the accelerated debt recovery procedure (summary diligence). Without registration, a landlord must go through a full court process which is potentially lengthy and expensive. Landlords will therefore want to ensure that leases are registered quickly. Under the lease or agreement for lease tenants are usually obliged to submit any required LBTT returns on time.

Landlord LBTT: If a premium is paid by the landlord to the tenant for the renunciation of a lease, LBTT may be payable by the landlord on that premium. The landlord may need to submit an LBTT return and pay LBTT.

Key take aways

LBTT rules can be complex and specialist advice should be sought from solicitors or tax advisors. Particular rules apply for leases which straddle the SDLT and LBTT regimes in Scotland.

Although LBTT is generally a tenant consideration, landlords should be familiar with the LBTT regime: the structure of deals can have an LBTT hit – or saving – for tenants; and a landlord may be liable for LBTT on a renunciation.


Jordon Reid


Elizabeth Ward

Legal Director

Charlotte Mackenzie

Tax Manager,Trainee Solicitor