LBTT: prepare to switch

This month, in a joint piece with HM Revenue & Customs (HMRC), Revenue Scotland provides a summary of the key processes for the transition from Stamp Duty Land Tax (SDLT) to Land and Buildings Transaction Tax (LBTT).

The move towards disapplying SDLT in Scotland and implementing LBTT from April of next year requires close working among Revenue Scotland, the Scottish Government, Registers of Scotland (RoS), HMRC and the UK Treasury. Indeed, referring to the “switch-off” of SDLT and “switch-on” of LBTT, while useful shorthand, does not do justice to the considerable legislative, technical and operational work that has to take place for a smooth transition. 

HMRC and Revenue Scotland have different requirements, but a shared aim of making it as easy as possible to pay the correct amount of tax on time. In particular, Revenue Scotland and HMRC are working together to ensure that tax returns for transactions where the effective date is on or after 1 April 2015 are submitted to the correct authority.

Changes from 1 October 2014

As part of this work, HMRC is revising its processes to prevent LBTT transactions being erroneously returned as SDLT transactions. The key identifier here is the local authority (LA) code entered on the SDLT return.

In preparation for these changes, from 1 October 2014 all SDLT returns must include a valid UK LA code. You can find a list of current LA codes in the online SDLT Manual at SDLTM62320 (www.hmrc.gov.uk/ manuals/sdltmanual/SDLTM62320.htm).

Online SDLT returns

Currently 96% of SDLT returns are submitted online. This is the best way to ensure that errors and delays are avoided. From 1 April 2015, a message will be displayed before you start to complete the online return, advising you not to submit a return for a Scottish land transaction to HMRC and referring you to Revenue Scotland for these cases. A Scottish LA code will not be accepted by HMRC’s online system after 1 April 2015.

Paper SDLT returns

If you submit a paper SDLT return including a Scottish LA code to HMRC after 1 April 2015, the form will be returned to you with advice about where to find out more about LBTT.

LBTT returns

Revenue Scotland will provide guidance on its website about how to submit LBTT returns. The website is expected to go live later this summer, and the guidance for LBTT returns will be added ahead of 1 April 2015.

You will need to register with Revenue Scotland if you want to submit LBTT returns online. The start date for registration will be well in advance of 1 April 2015. As with SDLT, online submission of LBTT returns will be the most effective and efficient method, but there will also be provision for submission of paper returns, which will be processed by RoS staff.

Next steps

HMRC and Revenue Scotland will be working hard in the run-up to April 2015, to ensure that all interested parties are aware of these changes and understand what they need to do. For example, HMRC is now including an advisory notice about the forthcoming changes along with SDLT error notices in cases where the LA code field has been left blank.

More information will be provided in this space over the coming months, but the main source for information regarding the new devolved taxes will be the Revenue Scotland website, which will be developed and added to in the months following its launch.