Land and Buildings Transaction Tax (Scotland) Act 2013 Schedule 10 paragraph 10A

Security arrangements over shares and their effect on group relief

Paragraph 10A deals with how certain security arrangements over shares or securities in a company are treated for the purposes of LBTT group relief, ensuring that shares held as security under a mortgage or equivalent arrangement do not disrupt the group relationship between companies.

• Where shares or securities in a company are held as security under a mortgage (in England, Wales or Northern Ireland) or an equivalent transfer-and-retransfer arrangement (in Scotland), the security holder is not treated as owning those shares for group relief purposes, provided the security has not been enforced.
• The rule ceases to apply once the lender enforces the security — for example, when a mortgagee exercises its rights against the mortgagor on default, or when a Scottish-law transferee retains the shares after the transferor fails to meet the required conditions.
• The protection does not apply if the security holder has greater rights over the shares than needed to protect its lending interest, or if the security holder (alone or with connected persons) could control the timing or terms of a default or other trigger event.
• Equivalent security arrangements under the law of a country outside the United Kingdom are treated in the same way as their domestic counterparts.