What does Schedule 18, paragraph 3 of the Land and Buildings Transaction Tax (Scotland) Act 2013 do?

Schedule 18, paragraph 3 creates a legal fiction for LBTT purposes, deeming a trust beneficiary to hold a beneficial interest in trust property. This applies regardless of whether Scots law or any other applicable legal system formally recognises such a beneficial interest, ensuring consistent LBTT treatment of trust transactions.

Why is a deeming provision needed for beneficial interests in Scottish trusts under LBTT?

Under Scots law, beneficiaries hold only personal rights against the trustee rather than a proprietary beneficial interest in trust property. Without this deeming provision, LBTT rules that depend on the existence of a beneficial interest could not apply consistently to Scottish trust transactions, potentially creating uncertainty or unintended tax gaps.

Does the LBTT deeming provision for beneficial interests apply to trusts governed by laws outside the United Kingdom?

Yes. The deeming provision applies equally where a trust is governed by the law of a country or territory outside the United Kingdom that does not recognise beneficial interests. This ensures LBTT operates consistently for all trust transactions involving Scottish land, regardless of the governing law of the trust.

How does the deemed beneficial interest affect a trust beneficiary in practice for LBTT?

In practice, the beneficiary is treated as holding a beneficial interest in trust property comprising Scottish land or buildings. This is critical because several LBTT provisions depend on beneficial interests when determining the purchaser or vendor in a transaction, or when applying reliefs and exemptions to trust property transactions.

Land and Buildings Transaction Tax (Scotland) Act 2013 section Schedule 18 para 3

Beneficiary's deemed beneficial interest in trust property

Schedule 18, paragraph 3 establishes that a beneficiary of a trust is to be treated as having a beneficial interest in the trust property for LBTT purposes, even where no such interest is formally recognised in law.

A beneficiary of a trust is deemed to hold a beneficial interest in the trust property for LBTT purposes.
This deemed beneficial interest applies regardless of whether Scots law recognises such an interest.
The same treatment applies where the trust is governed by the law of a country or territory outside the United Kingdom that does not recognise beneficial interests.
This deeming provision ensures consistent LBTT treatment of trust transactions irrespective of the underlying legal system.

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member