What terms does Schedule 8 paragraph 3 of the Land and Buildings Transaction Tax (Scotland) Act 2013 define?

Paragraph 3 defines bond assets, bond-holder, bond-issuer, and capital by reference to section 564G of the Income Tax Act 2007. It also defines prescribed as meaning specified in regulations made by the Scottish Ministers, and qualifying interest as a major interest in land excluding short leases of 21 years or less.

What is a qualifying interest under Schedule 8 paragraph 3 for LBTT purposes?

A qualifying interest is a major interest in land, meaning outright ownership or a lease longer than 21 years. Short leases of 21 years or less are specifically excluded. This limits the scope of the Schedule 8 reliefs and special LBTT rules to significant property interests involved in alternative finance investment bond arrangements.

Why does Schedule 8 paragraph 3 import definitions from the Income Tax Act 2007?

By importing definitions from section 564G of the Income Tax Act 2007, the LBTT legislation ensures consistency between the Scottish land transaction tax framework and the wider UK income tax treatment of alternative finance investment bonds. This means the same Sharia-compliant arrangements recognised for income tax purposes are also recognised for LBTT purposes.

How do the Schedule 8 definitions apply to a Sharia-compliant property purchase in Scotland?

When a Sharia-compliant fund issues bonds to investors and uses the capital to purchase property outright in Scotland, the building is the bond asset and investors are bond-holders. If the property is owned outright or leased for over 21 years, it is a qualifying interest and the special LBTT rules in Schedule 8 apply to the transaction.

Land and Buildings Transaction Tax (Scotland) Act 2013 Schedule 8 paragraph 3

Definitions used in the alternative finance arrangements schedule

Schedule 8 paragraph 3 defines key terms used throughout the schedule dealing with alternative finance (Sharia-compliant) investment bond arrangements in the context of LBTT.

Terms such as "bond assets", "bond-holder", "bond-issuer" and "capital" take their meaning from the Income Tax Act 2007 (section 564G), which sets out the rules for investment bond arrangements.
"Prescribed" means whatever is specified in regulations made by the Scottish Ministers, giving ministers the power to set detailed requirements by secondary legislation.
A "qualifying interest" is a major interest in land — essentially ownership (or a lease longer than 21 years) — but specifically excludes short leases of 21 years or less.
These definitions ensure consistency between the LBTT rules for alternative finance and the wider UK income tax framework for such arrangements.

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