With a limited number of exceptions, all new commercial leases in Scotland since 1 April 2015 have required an LBTT return to be submitted to Revenue Scotland shortly after the “relevant date” which varies depending on the particular circumstances. In some circumstances commercial leases in place prior to April 2015 which have since been varied will also have required an LBTT return.

The treatment of leases for LBTT purposes is significantly different to the treatment of purchases of land and buildings. The reasoning is simple, the terms of a lease can and usually will change over its lifetime. A lease may be varied, extended, assigned to another tenant or indeed may come to an end earlier than originally planned. All but the shortest leases will generally contain rent review provisions and it is common for the rent to be reviewed at regular intervals and/or on any extension of any lease. Extensions can be formally documented but can also occur by operation of law where the original lease is not terminated at the end of its documented term.

The LBTT legislation does not require a further LBTT return to be submitted to Revenue Scotland every time a change to the lease takes place. Instead, it requires that unless the lease has been terminated or assigned (at which point returns also need to be made), a further LBTT return is to be submitted by the tenant at every third anniversary of the effective date of the lease. It should also be noted that in the case of an assignation the assignee will still be required to make a LBTT return on every third anniversary of the effective date of the lease as the date of the assignation does not have any impact on the relevant filing dates. An assignation made in year two, for example, will still require a return in year three, unless it is terminated before then.

These three yearly LBTT returns inform Revenue Scotland of any changes that have occurred since the original effective date or last review date and allow the amount of tax chargeable on the lease to be reviewed taking account of those changes. Depending on the particular circumstances additional LBTT may need to be paid or some may be reclaimed. It is important to note that even if the lease has not been altered in any way a further return will still be required every three years to confirm that nothing has changed!

The 30 day timescale allowed for submission of the first of these triannual returns will start to run on 1 April 2018 for those leases which have a “relevant date” of 1 April 2015. While this may seem to be a long time away it is important for tenants to be aware of their obligations and to keep accurate records to be able to meet them when the time comes. Failing to make a return when required can result in penalties being applied by Revenue Scotland and these can be quite substantial.

If you require any further information or assistance in regard to the content of this article, please contact Steven Allan on 01224 581581 or This email address is being protected from spambots. You need JavaScript enabled to view it. or get in touch with your usual contact  at James & George Collie.