LBTT3022 - Rules relating to relief for alternative finance investment bonds where one bond asset is substituted for another

Further LBTT guidance on alternative finance investment bond relief when one bond asset is substituted for another.

All references below to any conditions regarding alternative finance investment bonds (AFIBs) relief are to those mentioned in LBTT3021.

Substitution of a bond asset for another asset

It is possible for the bond-holder to substitute one bond asset for another. Certain conditions need to be met on both the original land and the replacement land before relief for AFIBs is available in this circumstance. The mechanism which allows relief for AFIBs to be available is:

  • conditions A to C and G are met in relation to the original land;
  • the bond-issuer ceases to hold the original land as a bond asset (and, accordingly, transfers it to the bond-holder) before the termination of the alternative finance investment bond;
  • the bond-holder and the bond-issuer enter into further arrangements falling within condition A relating to an interest in the replacement land; and
  • the value of the interest in the replacement land at the time that it is transferred from the bond-holder to the bond-issuer is greater than or equal to the value of the interest in the original land at the time of the first transaction.

Further conditions in relation to the substitution of one band asset for another asset:

  • condition F does not need to be met in relation to the original land if conditions A, B, C, F and G are met in relation to the replacement land;
  • condition E applies as if the reference to the interest in the land were a reference to the interest in the original land; and
  • condition G applies as if the reference to the first transaction were a reference to the first transaction relating to the original land.

If the replacement land is in Scotland

If the replacement land is in Scotland, the original land ceases to be subject to the security registered in pursuance of condition D when:

  • the bond-issuer provides us with the prescribed evidence that condition G is met in relation to the original land; and
  • condition D is met in relation to the replacement land.

Where security is discharged as above, we must register a discharge of security within 30 days of the bond-issuer providing the appropriate evidence. The discharge must be registered in the Land Register of Scotland.

LBTT(S)A 2013 schedule 8 paragraph 23

‘Prescribed evidence’ in this context (where the replacement land is in Scotland) means:

  • the URN for the LBTT return in which relief from the tax was claimed on the transfer of the land from the original owner to the bond-issuer;
  • the URN for the LBTT return in which relief from the tax was claimed on the transfer of the land from the bond-issuer to the original owner; and
  • any document as provided by the Keeper confirming that the land has been registered in the name of the original owner.

The URN is provided upon submission of the LBTT return. The ‘original owner’ in this context is the buyer mentioned in condition A.

LBTT(S)A 2013 schedule 8 paragraphs 20 and 21

Regulation 18 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014

If the replacement land is not in Scotland

If the replacement land is not in Scotland, the original land ceases to be subject to the security registered in pursuance of condition D when the bond-issuer provides us with the prescribed evidence that:

  • condition G is met in relation to the original land; and
  • each of conditions A to C is met in relation to the replacement land.

Where security is discharged as above, we must register a discharge of security within 30 days of the bond-issuer providing the appropriate evidence. The discharge must be registered in the Land Register of Scotland.

LBTT(S)A 2013 schedule 8 paragraph 23

‘Prescribed evidence’ in this context (where the replacement land is not in Scotland) means:

  • the URN for the LBTT return in which relief from the tax was claimed on the transfer of the land from the original owner to the bond-issuer;
  • the URN for the LBTT return in which relief from the tax was claimed on the transfer of the land from the bond-issuer to the original owner;
  • any document that confirms that the replacement land is not in the United Kingdom and that conditions A to C in Part 3 of schedule 8 have been met in relation to that land; and
  • any document as provided by the Keeper confirming that the land has been registered in the name of the original owner.

The URN is provided upon submission of the LBTT return. The ‘original owner’ in this context is the buyer mentioned in condition A.

LBTT(S)A 2013 schedule 8 paragraph 21

Regulation 19 of The Land and Buildings Transaction Tax (Administration) (Scotland) Regulations 2014

Conditions for further replacement land

All of the rules above apply to further replacement land as they apply to replacement land.

LBTT(S)A 2013 schedule 8 paragraph 22

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