In February 2015, parties agree in principle that they will enter into a 10 year lease with an annual rent of £100,000. They aim to conclude formal documentation on 1 May 2015. The agreement is substantially performed on 1 March 2015 by the tenant taking entry to the property without the lease having been signed.
The substantial performance of the agreement will give rise to a charge to SDLT with an effective date of 1 March 2015.
The lease is subsequently signed off on 1 May 2015 in the terms proposed.
The completion on 1 May 2015 is the first LBTT event so a return is due under section 29 of LBTT(S)A. But as there was substantial performance under SDLT, Article 4 of the Land and Buildings Transaction Tax (Transitional Provisions)(Scotland) Order 2014 is engaged for the calculation of tax. In this case the SDLT return and tax liabilities have been met. Where SDLT has already been charged and paid, LBTT is due only on any additional tax amount compared to the amount of SDLT already paid.
The SDLT calculation provides for a Net Present Value (NPV) of £831,659 and tax due of £6,816 based on the annual rent of a £100,000 for this 10 year lease.
The LBTT calculation produces the same Net Present Value (NPV) and LBTT due. Accordingly there will be no LBTT payable but an LBTT return became due on 31 May 2015.
The date of the first three yearly review will be the third anniversary of the effective date of the LBTT transaction, that is, 1 May 2018. This return must be made to us by the filing date of 31 May 2018.