LBTT3020 - Alternative property finance relief: land sold to financial institution and re-sold to a person

LBTT guidance on tax relief where a financial institution purchases and then re-sells a property to a person borrowing money from the institution.

This relief is provided by the relevant provisions of schedule 7 to the LBTT(S)A 2013.

Description of relief

This form of the relief applies where a financial institution purchases a property and re-sells it to a person, the person borrows some or all of the purchase price from the financial institution and grants a standard security to the financial institution over that property.

As two land transactions take place under these arrangements, the combined effect of the reliefs is to bring the LBTT on the purchase using these arrangements in line with that payable on a purchase financed with a conventional mortgage product.

The rules ensure that, where the arrangements are completed in the manner provided for, and all the other rules are complied with, only one LBTT charge is payable (although as explained below, in certain circumstances relief for the first transaction may also be claimed).

Relief mechanism

For this relief to be claimed, arrangements must be entered into between a person and a financial institution as follows:

  • the financial institution purchases a major interest in land - the first transaction;
  • the institution sells that interest to the person, that is the institution sells the whole of the major interest obtained to the person - the second transaction; and
  • the person grants the financial institution a standard security over that interest.

LBTT(S)A 2013 schedule 7 paragraph 13

The first transaction (the purchase of a major interest in land by the financial institution) will generally be chargeable to LBTT but relief may be claimed by the financial institution if the seller is:

  • the person who enters into the arrangements (the first case); or
  • another financial institution by whom the interest was acquired under arrangements described above and the arrangements were entered into between it and the person (the second case).

LBTT(S)A 2013 schedule 7 paragraph 14

Relief from LBTT may be claimed on the second transaction (the re-sale of the property by the financial institution to the person) if all the requirements relating to the first transaction are complied with. This includes payment of any LBTT due on the first transaction.

LBTT(S)A 2013 schedule 7 paragraph 15

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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