What does section 38 of Schedule 10 of the Land and Buildings Transaction Tax (Scotland) Act 2013 do?

Section 38 provides an exception to the withdrawal of group relief under paragraph 33. It prevents relief being clawed back where a change of control of the buyer occurs solely because a loan creditor gains or ceases to have control, provided the original controlling persons remain in control of the buyer throughout.

What is a loan creditor for the purposes of this LBTT group relief exception?

A loan creditor is defined by reference to section 453 of the Corporation Tax Act 2010. It broadly covers a person who has lent money to a company or who holds that company's loan capital or debt instruments. Such a creditor may be treated as having control of the company under relevant tax rules.

What conditions must be met for the loan creditor exception to apply under paragraph 38?

Two conditions must both be satisfied. First, the change of control must arise only because a loan creditor obtains or ceases to have control of the buyer. Second, the persons who controlled the buyer before the change must continue to control it afterwards. If either condition fails, group relief may still be withdrawn.

Can group relief be preserved if a bank acquires control of the buying company after an LBTT group relief transaction?

Yes, group relief can be preserved in this situation. If the bank qualifies as a loan creditor and acquires control solely through lending arrangements, and the original parent company continues to control the buyer, paragraph 33 does not apply. The previously claimed group relief on the land transaction is not withdrawn.

Land and Buildings Transaction Tax (Scotland) Act 2013 section 38

Exception from withdrawal of group relief where change of control involves a loan creditor

Section 38 of Schedule 10 provides an exception to the rule in paragraph 33 that withdraws group relief when there is a change of control of the buyer, specifically where the change is caused solely by a loan creditor gaining or losing control.

Paragraph 33 can withdraw group relief where there is a change in control of the buyer following a group relief land transaction
This withdrawal does not apply if the change in control arises only because a loan creditor obtains or ceases to have control of the buyer
A loan creditor is defined by reference to section 453 of the Corporation Tax Act 2010, which covers persons who have lent money to a company or hold its debt securities
The exception only applies if the persons who controlled the buyer before the change continue to control it afterwards

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