LBTT3031 - Acquisition relief

LBTT guidance on tax relief which applies where land or buildings are transferred as part of the acquisition of an undertaking of a company.

LBTT3031 - Acquisition relief

This relief is provided by the relevant provisions of Part 3 of schedule 10 to the LBTT(S)A 2013.

Guidance on the withdrawal and recovery of acquisition relief is available separately, see LBTT3032 and LBTT3033 respectively.

Description of relief

Acquisition relief  is a partial relief and may be claimed, subject to certain conditions, where land or buildings are transferred as part of the acquisition of an undertaking of a company.

Relief conditions

All five of the qualifying conditions below must be met for acquisition relief to apply:

1. The acquiring company must acquire the whole or part of the undertaking of another ‘target’ company.

2. The consideration for the acquisition of the whole or part of the target company must consist wholly or partly of the issue of non-redeemable shares in the acquiring company to either the target company or any or all of the target company’s shareholders.

If the consideration consists partly of non-redeemable shares, this condition is met only if the rest of the consideration consists wholly of:

  • cash not exceeding 10% of the nominal value of the non-redeemable shares that were issued;
  • the assumption or discharge by the acquiring company of liabilities of the target company; or
  • both of the above.

3. The acquiring company must not be associated with another company that is a party to arrangements with the target company relating to shares of the acquiring company issued in connection with the acquisition of the target company. In this context, companies are ‘associated’ if one has control of the other, or both are controlled by the same person or persons. ‘Control’ is determined by reference to section 1124 of the Corporation Tax Act 2010.

4. The main activity of the target company or the part of it being acquired must not consist of dealing in chargeable interests.

5. The acquisition must take place for bona fide commercial reasons and must not form part of an arrangement the main purpose or one of the main purposes of which is to avoid LBTT.

The relief mechanism

The amount of acquisition relief available is 87.5% of the total tax that would be payable on the transaction without the relief, applying the tax rates and bands to the chargeable consideration in the usual way.

So the amount of tax due is 12.5% of the total tax that would otherwise be payable on the transaction.

The Land and Buildings Transaction Tax (Prescribed Proportions) (Scotland) Order 2014

Claiming the relief

To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website.

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