What happens when an LBTT-exempt lease is assigned to a non-qualifying tenant under Schedule 19 paragraph 27?

When a lease originally granted free of LBTT under a qualifying relief is assigned to a tenant who does not qualify for the same relief, the assignation is treated as a deemed new lease grant. The new lease runs for the unexpired term of the original lease, and LBTT is calculated on the rent and any premium payable for that remaining period.

Which reliefs trigger the deemed new lease rule under paragraph 27 of Schedule 19?

The reliefs that trigger paragraph 27 are sale and leaseback relief (Schedule 3), alternative finance investment bonds relief (Schedule 8), group relief (Schedule 10), reconstruction and acquisition relief (Schedule 11), charities relief (Schedule 13), public bodies relief (Schedule 16), and green freeports relief (Schedule 16D).

Does paragraph 27 apply if the assignee is a bare trustee of the assignor?

No, paragraph 27 does not apply if the assignee acquires the lease as a bare trustee of the assignor. This exception recognises that in bare trust arrangements beneficial ownership has not truly changed hands, so there is no policy reason to treat the assignation as a new taxable lease grant.

When does paragraph 27 not apply because the relief has already been withdrawn?

If the original relief was group relief, reconstruction or acquisition relief, or charities relief, and that relief was already withdrawn due to a disqualifying event occurring before the assignation's effective date, paragraph 27 does not apply. The original transaction will already have been brought back into LBTT charge, so no additional deemed lease grant is necessary.

Land and Buildings Transaction Tax (Scotland) Act 2013 section Schedule 19 paragraph 27

Assignation of exempt leases

Schedule 19, paragraph 27 deals with what happens when a lease that was originally granted free of LBTT (because it qualified for a relief) is subsequently assigned to a new tenant who does not qualify for the same relief.

Where a lease was originally granted exempt from LBTT under certain specified reliefs, and that lease is later assigned to someone who does not qualify for any of those reliefs, the assignation is treated as if it were a brand new grant of lease
The deemed new lease is treated as being granted by the assignor (the outgoing tenant) for a term equal to whatever time remains on the original lease, on the same terms the new tenant holds the lease after the assignation
The specified reliefs that trigger this rule are: sale and leaseback relief, alternative finance investment bonds relief, group relief, reconstruction and acquisition relief, charities relief, public bodies relief, and green freeports relief
This rule does not apply if the relevant relief (group, reconstruction, acquisition or charities relief) has already been withdrawn due to a disqualifying event that occurred before the date of the assignation

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