This relief is provided by the provisions of schedule 10A to LBTT(S)A 2013
Description of relief
The sub-sale development relief (SSDR) is available to the first buyer in a land transaction. The transaction must involve sub-sale arrangements with the expectation of significant development. The first buyer claims the relief at the point when they submit their LBTT return.
There is a restriction on the relief to the first buyer only.
It is not available to a second or subsequent buyer where a chain of sub-sale arrangements is in place.
SSDR is available to the first buyer in a contract, where the buyer acquires a chargeable interest, completed by a conveyance if:
- there is a qualifying sub-sale
- the qualifying conditions are met
Note: the ‘first contract’ – does not include a contract that is a sub-sale or an assignation of rights in relation to another contract.
The relief is not applicable where there is also a relief claim related to alternative property finance (see LBTT3017).
A sub-sale is a ‘qualifying sub-sale’ if it is a sub-sale under which:
- the first buyer contracts to sell the whole or part of the subject-matter of the first contract to another person (the ‘second buyer’)
- the second buyer becomes entitled to call for a conveyance to that person of the whole or part of the subject-matter of the first contract
- immediately before the first buyer entered into the sub-sale, the first buyer was entitled under the first contract to call for a conveyance of the whole or part of that subject-matter
There are qualifying conditions for the relief.
The substantial performance or completion of the first contract must take place:
- at the same time as
- in connection with
the substantial performance or completion of the qualifying sub-sale.
Significant development for commercial purposes of the subject-matter will be completed within five years from the date on which the first buyer entered into the qualifying sub-sale.
Where an assignation, sub-sale or other transaction entitles another person where this is not the second buyer, to call for a conveyance, this is not treated as substantial performance of the qualifying sub-sale.
Note: this is the case whether it relates to the whole or only part of the subject-matter of the qualifying sub-sale.
Means the chargeable interest, the conveyance of which the second buyer is entitled to call for as a result of the qualifying sub-sale.
- part of the subject-matter
Means part of the chargeable interest, where the chargeable interest of the sub-sale is part of the chargeable interest under the first buyers first contract.
Includes the building of educational, sports and leisure, residential, retail, office or industrial buildings. Redevelopment of such buildings where this is comparable in scale and cost to construction.
Excludes agricultural buildings, mining or engineering works (other than wind farms) or plant and machinery.
Something that is used for the purposes of the trade of agriculture. This includes horticulture, fruit growing, seed growing, dairy farming, livestock breeding and keeping, the use of land as grazing land, meadow land, osier land, market gardens and nursery grounds and the use of land for woodlands where that use is ancillary to the farming of land for other agricultural purposes.
Has the meaning given in section 55 of the Building (Scotland) Act 2003; and
- industrial building
Includes a building built to be used for the purposes of a trade carried on in a factory, mill or laboratory, for the purposes of a dock undertaking, for the purposes of the trade of hotel-keeping, or for the purposes of a trade which consists of the operation or management of an airport used solely or mainly by aircraft carrying passengers or cargo for hire or reward.
- significant development
This is significant in relation to, the nature and extent of the subject matter and also its market value.
The relief is not intended to be available, where an existing building on a site is to be subject to a refurbishment, or where only minor ‘development’ takes place, relative to the nature, extent and market value of the land that is the subject of the sub-sale arrangement.
- Substantial performance
Has the meaning as described in LBTT1005 - Contract and conveyance | Revenue Scotland
In relation to a sub-sale where:
A contracts to sell to B and before completion B contracts to sell to C.
On conclusion of missives between B and C, C becomes ‘entitled’ to call for a conveyance.
Substantial performance is initiated on the A to B transaction, creating a tax point.
Note: This issue was previously discussed in LBTT Technical Bulletin 1, published on 14 October 2016. The scenario as set out above is as intended by LBTT(S)A 2013 Section 14(1)(c), where there is an assignation, sub-sale or other transaction (relating to the whole or part of the subject-matter of the contract) as a result of which a person other than the original buyer becomes entitled to call for a conveyance to that person.
- Disapplication ‘substantial performance’
Where relief under Schedule 10A would be given, paragraph 16 disregards section 14(1)(c) where the transaction relates to the entry into a qualifying sub-sale by the first buyer.
- Qualifying conditions ‘relevant period’
There are differences between the date on which the first buyer enters into the qualifying sub-sale and the effective date of the pre-completion transaction. LBTT(S)A 2013, Schedule 10A, paragraph 4 is in reference to a ‘qualifying sub-sale’.
Paragraph 4(1)(a) requires the substantial performance or completion of the first contract to take place at the same time as, and in connection with, the substantial performance or completion of the qualifying sub-sale. A sub-sale contract becomes a ‘qualifying sub-sale ’at this point.
Paragraph 4(3) refers to the “relevant period” as being the period of 5 years from the date on which the first buyer entered into the qualifying sub-sale.
The ‘relevant period’ can begin from the date of substantial performance or completion of both contracts, rather than the date the contract is first entered into if the contract is not deemed a qualifying sub-sale until a later date.
Full relief is available on the first land transaction where the subject-matter of the qualifying sub-sale is the whole subject-matter of the first contract and the land transaction is one that is either:
Realised on completion of the first contract. Due to the transaction completion without having been substantially performed – see LBTT1005
Treated as realised. Due to the contract being substantially performed as the contract has been substantially performed without completion – see LBTT1005
Partial relief is available where the subject-matter of the qualifying sub-sale is part of the first contract.
Calculating the chargeable consideration for the first land transaction = A-B.
A. is the chargeable consideration for the transaction if there was no sub-sale
B. is the amount of consideration on a just and reasonable basis to the part of the transaction which is also the subject-matter of the qualifying sub-sale
Calculating the chargeable consideration for the qualifying sub-sale = C+D
C. is the consideration under the first land transaction applicable to the qualifying sub-sale given directly or indirectly by the second buyer or a person connected with the second buyer
D. is the consideration given for the qualifying sub-sale
The second buyer may pay the first buyer a premium for the sub-sale transactions and may have to pay the first seller some or all of the purchase price under the first contract.
Claiming the relief
Sub-sale development relief can only be claimed per LBTT(S)A 2013, Part 3, 27(2) by:
- including a claim for relief in the original LBTT return
- making an amendment to the LBTT return within the amendment period
To claim this relief, see further guidance at: 'How to make a LBTT return and pay tax'
When the first buyer claims the relief by submitting a LBTT return, evidence in support of the claim must be available. This must show that significant development will take place.
Examples of evidence include but are not limited to:
- development/architectural plans
- details of funding arrangements
- building contracts
- planning permission applications.
Withdrawal of relief
Full withdrawal of relief occurs if no significant development takes place within five years from the date the first buyer entered into the qualifying sub-sale.
Where relief is fully withdrawn, the amount of tax chargeable in relation to the first land transaction is the amount that would have been chargeable in respect of the transaction but for the relief.
Partial withdrawal of relief occurs if the proposed significant development does not take place within:
- five years from the date the first buyer entered into the qualifying sub-sale
- some development of the subject-matter of the qualifying sub-sale has taken place within that period
Where partial withdrawal of relief occurs, the amount of tax chargeable in relation to the first land transaction is on a just and reasonable apportionment. The apportionment is on the amount that would have been chargeable but for the relief. Taking into account the extent to which any proposed development has taken place.
Details of partial development must be available to evidence any apportionment and LBTT return figures.
Where relief is withdrawn in full or in part the first buyer in the sub-sale arrangement must:
- make a further LBTT return within 30 days of the end of the five-year period
- pay any tax which becomes due as a result of the further return