Non-residential property means any property that is not residential property. See LBTT4010 for the meaning of residential property.
Property in a land transaction is non-residential if:
the main subject-matter of the transaction consists of or includes an interest in land that is non-residential property or
the transaction is one of a number of linked transactions and the main subject-matter of any of these transactions consists of or includes an interest in land that is non-residential property
The LBTT(S)A 2013 specifically defines the following buildings, or part of a building, as not used as a dwelling and therefore non-residential:
a home or other institution providing residential accommodation for children (a care inspectorate registration or similar would be expected to be held for this)
a hall of residence for students in further or higher education (specifically halls of residence and not merely accommodation for students)
a home or other institution for persons in need of personal care due to old age, disability, drug or alcohol dependency or mental health conditions (a care inspectorate or other relevant registration / licence would be expected to be in place for these types of homes / institutions)
a hospital or hospice
a prison or similar establishment
a hotel or inn or similar establishment (business documentation including any relevant licences would be expected to be held showing the business purpose / commercial use)
Where a building is used for one of these purposes, no account is to be taken of its suitability for any other use for the purposes of defining residential property at Section 59(1)(a).
Non-residential property may also include:
commercial property, for example shops or offices
property that isn’t suitable to be lived in e.g. uninhabitable dwellings
agricultural land that’s part of a working farm
a registered croft.
Evidence should be kept to show that the land and/or buildings purchased satisfy the legislation and guidance to be considered non-residential and each case will be considered by Revenue Scotland on its own facts. For example, where a building is being used at the effective date as an office, it is likely Non-Domestic Rates (NDR) are being paid and the building is permitted to be used as an office.
Undeveloped land is essentially non-residential but may be residential property if, at the effective date, a residential building is being built on it. See LBTT4010 for the meaning of ‘Constructed or Adapted for Use’.
6 or more dwellings
Where 6 or more separate dwellings form a single purchase transaction or a grant of a lease over them, the whole transaction is treated as non-residential. However, multiple dwellings relief (MDR) can be applied to the transaction.
A dwelling may no longer be suitable for use as a dwelling where damage to a property is beyond the extent of normal repair, modernisation or refurbishment work at the effective date.
If on the effective date:
the structural integrity is compromised to the extent that without significant repair work it would be deemed unsafe to live in or
repair work to make the dwelling suitable to live in requires demolishing the existing structure
it is likely the property would be deemed unsuitable as a dwelling and therefore non-residential rates would apply.
Normal repair would include:
fitting of kitchen or bathroom facilities
repairing or replacing windows
repair work to the roof including a re-slate, re-tile or re-thatch
reconnection to utilities such as the fitting of a boiler for heating and replacement of piping to access water
repair work or replacement of supporting timbers
repair work as a result of water or fire damage
replacement of fixtures and fittings that have been removed
A hall of residence for students in further or higher education
These will ordinarily be buildings owned and managed by the educational establishments that the students residing in the building attend. These will be traditional ‘halls’ buildings that often sit on the campus of the educational establishment, or close to it, and students can only live in the building if they attend the educational establishment in question.
Residential accommodation for students other than student halls of residence, such as the type of properties owned by companies that specialise in the provision of student accommodation, are, while aimed at the student market, not owned by, or involved with, the educational establishments that the students in these buildings attend. There will still be an obligation for all residents to be students, however, these properties are subject to the residential rates.
Any other residential accommodation which happens to be let to or otherwise used by students but is not a hall of residence will be subject to residential rates.
Orange Ltd buys office premises at £872,000.
LBTT will be calculated at non-residential rates and bands:
|Up to £150,000||Ni rate band||£0.00|
|Above £150,000 to £250,000||1%||£100,000 x 1% = £1000|
|Above £250,000||5%||£622,000 x 5% =£31,100|
Total LBTT due
LBTT may apply to anyone leasing non-residential land or property in Scotland.
The LBTT due on non-residential leases depends on the amount of rent being paid under the lease and other chargeable consideration, such as lease premiums.
For further guidance see:
LBTT6001 - Leases
LBTT60032 – Consideration other than Rent
LBTT6007 - Three yearly review of the tax chargeable
Purple Ltd have leased office space on a three year lease paying rent of £75,000 each year.
Their LBTT will be calculated using Lease rates and bands:
In this case the NPV is £210,122.77 (use the LBTT Lease calculator to help work this out)
|Up to £150,000||0% =£0.00|
|Above £150,000 to £2,000,000||£60,122.777 x 1% =£601.23|
Yellow Ltd have taken on a five year lease for an office block, a premium of £2,750,000 was paid with annual rent of £80,000.
The LBTT will be calculated using Lease Rates and bands:
In this case the NPV is £361,204.19
|LBTT on Rent|
|Up to £150,000||0% = £0.00|
|Above £150,000 to £2,000,000||£211.204.11 x 1% =£2112.04|
|LBTT on Rent||£2112.04|
|Up to £150,000||0% = £0.00|
As rent is over £1000 per month the nil rate band will be charged at 1%.
|£150,000 x 1% = £1500|
|Above £150,000 to £250,000||£100,000 x 1% = £1000|
|Above £250,000||£2,500,000 x 5% =£125,000|
|LBTT on Premium||£127,500|