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Taxing Times - LBTT 3% Surcharge for Rural Property Transactions


Taxing Times - LBTT 3% Surcharge for Rural Property Transactions

From 1st April 2016 additional surcharges to LBTT will apply to some residential property purchases.
After 1st April 2016 the Scottish rate of Land and Buildings Transaction Tax (LBTT) will add an additional surcharge of 3% on (i) second homes, and (ii) any residential properties bought by any non individual entities (e.g. Companies, Partnerships and Trusts) on purchases of residential properties.

What does this mean for me?

If a partnership or company wishes to purchase any residential property they will be required to pay an additional 3% tax over and above the usual LBTT on the purchase price for any residential property purchase where the Price is over £40,000.

Farms and estates will also be affected if they buy cottages or properties to provide service occupancies for staff or add strategic properties to their existing holding.

If you are looking to buy a farm or estate with 6 or more residential properties then the purchase will be deemed to be “a portfolio purchase” and the 3% surcharge will not be payable on any part of the residential element.

If a farm or estate is being bought with both residential elements and non residential elements (e.g. farm buildings, land, fishings, woodland and moorland) the purchase price needs to be apportioned between residential and non residential elements. The LBTT surcharge would be payable on the residential elements only.

If you are looking to purchase a second home in Scotland regardless of whether your principal residence is in Scotland, the 3% surcharge will apply regardless of whether you purchase the property in the name of a (a) spouse/civil partner, (b) cohabitant or (c) child who is under the age of 16, or any child of a spouse, civil partner, or cohabitant’s who is under the age of 16.

If you have any queries in relation to LBTT and the impact it may have on any future rural purchases please contact our specialist Land & Rural Business team.

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