New regulations allow Scottish first-time buyers and group companies to claim tax relief

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Walker Morris partner Louise Power outlines the benefits for Scottish first-time buyers and group companies brought in by new regulations as of 30 June 2018.

New Regulations

The Land and Buildings Transaction Tax (First-Time Buyer Relief) (Scotland) Order 2018 and the Land and Buildings Transaction Tax (Group Relief Modification) (Scotland) Order 2018 came into force on 30 June 2018.

First-time buyers

The former inserts a new Schedule 4A into the Land and Buildings Transaction Tax (Scotland) Act 2013 (LBTT(S)A 2013), which aims to provide a degree of relief from Land and Buildings Transaction Tax (LBTT) for first-time buyers. (A “first-time buyer” is someone who has not previously been the buyer of a major interest in a residential dwelling, whether purchased inside or outside of Scotland.) Where applicable, the relief effectively raises the zero tax threshold for first-time buyers from £145,000 to £175,000. Furthermore, first-time buyers buying a residential property above £175,000 will benefit on the portion of the price below the threshold. In short, all first-time buyers who meet the qualifying conditions will benefit from relief of up to £600.

The Scottish Fiscal Commission has forecast that this will result in 80 per cent of first-time buyers in Scotland paying no LBTT at all and overall it is estimated that this regulation will help 12,000 first-time buyers each year.

Group companies

The latter adds a new paragraph 10A to Schedule 10 of the LBTT(S)A 2013, amending the rules on group tax relief and the restrictions to its availability in Scotland. Provided certain conditions are met, the regulation provides relief from LBTT where, at the effective date, the seller and buyer are both companies in the same group. Where the rules are met, this allows companies to move property within a corporate group structure for commercial reasons without having to pay LBTT.

Under the previous legislation, group relief was not available if, at the effective date, there were arrangements in place by virtue of which an individual or individuals did or could obtain control of the buyer but not the seller. Under the new regulations, however, group relief is still available if shares in the company are mortgaged by a legal or equitable charge, provided the contingency allowing the mortgage to be called up does not arise.

WM Comment

Ultimately, the new orders mean that relief from tax is more readily available for first-time buyers of residential property and for companies in the same group. The changes to the rules for group tax relief in particular provide clarity and certainty in terms of qualification for the relief, while the updated legislation surrounding the taxing of first-time buyers aims to assist Scottish people in getting on the property ladder.