What does paragraph 23 of Schedule 7 to the Land and Buildings Transaction Tax (Scotland) Act 2013 do?

Paragraph 23 disapplies the exempt interest treatment under paragraph 21 for financial institutions where the first transaction in an alternative property finance arrangement is already exempt from LBTT under group relief (Schedule 10) or reconstruction and acquisition reliefs (Schedule 11). This prevents two separate reliefs from stacking on the same arrangement.

Why does paragraph 23 prevent the exempt interest treatment when group relief or reconstruction relief applies?

Paragraph 23 prevents overlapping reliefs because if the first transaction already benefits from corporate relief, the additional exempt interest protection is unnecessary. Allowing both could create unintended consequences, particularly if the corporate relief were later withdrawn, as the exempt interest treatment might otherwise shield a transaction that should properly bear LBTT.

What happens if group relief on the first transaction is later withdrawn where paragraph 23 applies?

If group relief is withdrawn — for example because a company leaves the group within three years — the full LBTT consequences of the alternative property finance arrangement must be considered. Because paragraph 23 has already switched off the exempt interest treatment, the bank's involvement is not shielded, and the arrangement is governed solely by the corporate relief clawback rules.

Which specific reliefs trigger the disapplication of paragraph 21 under paragraph 23?

Paragraph 23 is triggered when the first transaction in the alternative finance arrangement qualifies for group relief under Schedule 10 or for reconstruction and acquisition reliefs under Schedule 11 of the Land and Buildings Transaction Tax (Scotland) Act 2013. These are the two corporate reliefs that cause the exempt interest treatment to be switched off.

Land and Buildings Transaction Tax (Scotland) Act 2013 Schedule 7 paragraph 23

Paragraph 21 does not apply if the first transaction is exempt from charge

Paragraph 23 removes the exempt interest treatment for financial institutions where the first transaction in an alternative property finance arrangement already benefits from group relief or reconstruction and acquisition reliefs.

Paragraph 21, which treats a financial institution's interest as exempt in alternative finance arrangements, is disapplied in certain circumstances.
The disapplication occurs when the first transaction in the arrangement is already exempt from LBTT under group relief (Schedule 10).
It also applies where the first transaction is exempt under reconstruction and acquisition reliefs (Schedule 11).
This prevents a double layer of relief being claimed on the same arrangement.

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