What does Schedule 11 paragraph 5 of the Land and Buildings Transaction Tax (Scotland) Act 2013 do?

Paragraph 5 provides that treasury shares held by either the target company or the acquiring company immediately before a land transaction are treated as having been cancelled. This ensures ownership percentage calculations for LBTT group relief qualifying conditions reflect genuine external shareholdings rather than being distorted by shares a company holds in itself.

How are treasury shares treated for LBTT group relief ownership calculations?

Treasury shares are treated as though they had been cancelled before the acquisition. The company holding its own shares is not regarded as a shareholder of itself. When calculating whether the required ownership thresholds under qualifying conditions (b) and (c) are met, treasury shares are excluded entirely from the total issued share count.

Why is it necessary to disregard treasury shares when assessing LBTT group relief eligibility?

If treasury shares were counted normally, they could artificially inflate or deflate the ownership ratios used to determine group relief eligibility. Disregarding them ensures the ownership percentage tests accurately reflect the proportion of shares held by external parties, providing a meaningful basis for assessing whether group relief qualifying conditions are satisfied.

Can treasury shares affect whether the ownership percentage threshold for LBTT group relief is met?

Yes, but paragraph 5 prevents this. For example, if a parent owns 80 of 100 issued shares and the subsidiary holds 10 as treasury shares, treating those 10 as cancelled gives the parent 80 out of 90 shares — approximately 89% rather than 80%. This recalculation may determine whether the relief threshold is satisfied.

Land and Buildings Transaction Tax (Scotland) Act 2013 Schedule 11 paragraph 5

Treatment of treasury shares in group relief acquisitions

Schedule 11 paragraph 5 explains how shares held by a company in itself (known as treasury shares) are to be treated when determining whether the qualifying ownership conditions for group relief are met.

This provision applies where either the target company or the acquiring company holds its own shares immediately before the land transaction takes place.
Any such treasury shares are treated as if they had been cancelled before the acquisition occurred.
The effect is that the company holding its own shares is not regarded as being a shareholder of itself for the purposes of the relevant qualifying conditions.
This ensures that the ownership percentage tests for group relief (qualifying conditions (b) and (c)) are calculated on a meaningful basis, reflecting genuine external ownership rather than being distorted by treasury shares.

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