What does section 42I of the Land and Buildings Transaction Tax (Scotland) Act 2013 do?

Section 42I gives a person who has paid an amount to Revenue Scotland under a recovery notice, following the withdrawal of group relief, a statutory right to recover that amount from the buyer in the original land transaction. This ensures the financial burden ultimately falls on the buyer who benefited from the relief.

Who can receive a recovery notice from Revenue Scotland when LBTT group relief is withdrawn?

Revenue Scotland may issue a recovery notice to a responsible person within the group, requiring payment of the LBTT that was originally relieved. This responsible person is not necessarily the buyer in the original transaction — it may be, for example, the parent company responsible for the group's tax affairs.

Can a parent company recover LBTT paid on behalf of a subsidiary under section 42I?

Yes. If a parent company pays the amount demanded by Revenue Scotland following a recovery notice, section 42I provides a statutory right to recover that amount from the subsidiary that was the buyer in the original transaction. This ensures the subsidiary bears the economic cost of the withdrawn group relief.

Why does section 42I place the ultimate financial burden on the buyer?

Section 42I ensures the buyer bears the cost because the buyer originally benefited from the group relief on the land transaction. Even though the initial demand for payment may be directed at another party within the group structure, the provision allows that party to seek reimbursement from the buyer.

Land and Buildings Transaction Tax (Scotland) Act 2013 section 42I

Recovery of amounts paid from the buyer

Section 42I establishes that a person who has paid an amount to Revenue Scotland following a recovery notice can recover that amount from the buyer in the transaction.

Where group relief has been withdrawn, Revenue Scotland may issue a recovery notice to a responsible person requiring payment of the tax that was previously relieved.
The person who receives and pays such a recovery notice is not necessarily the buyer in the original transaction.
This provision gives the person who has paid the amount a legal right to recover what they paid from the buyer.
This ensures that the ultimate financial burden of the clawed-back relief falls on the buyer who benefited from the original relief.

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