Update on UK Land and Buildings Transactions Taxes – TaxBack

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Update on UK Land and Buildings Transactions Taxes

Recent changes made with regard to the UK tax system include developments in relation to the UK Land and Buildings Transactions Taxes (LBTT). Some of them are quite helpful to taxpayers, but let’s look at these in a little more detail…

Here is an Update on Land and Buildings Transactions Taxes

Many legislative changes have been made in Scotland too, including two draft statutory instruments which became effective as of 30th June 2018. One concerns group relief, while the other concerns first time buyer’s relief. Legislation with regard to the provision of relief from additional dwelling supplements has also been amended under specific circumstances.

If a person, on the date the transaction becomes effective, has made arrangements to control the buyer, but not the seller at a future date, the LBTT group relief won’t be available. The amendment states that, if shares in a company are mortgaged by legal or equitable charge and if contingencies allowing the mortgage to be called don’t happen, the restrictions won’t apply.

In Scotland, where rights in shares/securities are transferred to a creditor under the condition that the creditor has to re-transfer the shares/securities to the debtor if certain conditions have been met, the amendment becomes applicable. The amendment brings Scottish legislation in line with those of England, Northern Ireland and Wales.

Proposal announced by the Scottish Government

The draft Scottish statutory instrument, which became effective on 30th June 2018 hiked the nil rate threshold for LBTT on residential property to £175,000 from the previous £145,000 for first-time buyers. The proposal announced by the Scottish Government in December 2017, publishing the Draft Budget for 2018/19 and as a response to the introduction of similar relief from November 22, 2017 was thus implemented.

From 23rd June 2018, rules on LBTT Additional Dwelling Supplement (ADS) have changed with the introduction of the LBTT (Relief from Additional Amount) (Scotland) Act 2018. Additional guidance has been issued by Revenue Scotland on claiming relief from the ADS. According to the new Act, some taxpayers may be able to make retrospective claims on already paid ADS tax if the transaction involves family units. Statutory Instruments had previously introduced relief for replacement of primary residences, but they were applicable only for contracts signed on or after 20th May 2017 with the effective date being 30th June 2017. There was no provision for retrospective effect relief, which is now available with the amendment.  Contracts signed on or after 28th January 2016 where the effective date of the transaction is on or after 1st April 2016 will now be eligible for repayment/relief. 

Instances where claims are eligible for repayment:

  • Spouses, civil partners or cohabitants jointly bought a dwelling which they have both occupied as their main residence, and 18  months within that purchase, they sold a dwelling which both occupied earlier as their main residence, but which was owned by one of them.

Instances where relief can be claimed:

  • Spouses, civil partners or cohabitants jointly bought a dwelling which they have both occupied as their main residence.
  • And if within 18 months before that purchase, they sold a dwelling which both occupied earlier as their main residence, but which was owned by one of them.
  • At the effective date of the new joint purchase, either buyer owned or was deemed to own another dwelling.

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