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Land and Buildings Transaction Tax (Amendment) (Scotland) Act 2016

Paragraph 3 of schedule 2A  – Transactions where buyer is a non-individual etc.

22.Paragraph 3 is relevant to less standard cases where the buyer of a dwelling is not an individual or couple(6) purchasing for their domestic interests. It applies therefore to purchases by companies and sub-paragraph (2) concerns purchases by individuals acting as sole traders, if the sole or main activity of that business is the buying or investing in property.

23.When an individual buys a dwelling with the intention of renting it out, it will not necessarily be the case that this transaction is considered to be undertaken in the course of a business, the sole or main activity of which is buying or investing in property(7). If an individual works away from home, for example in the armed forces, and buys their first residential home to rent out, at least initially, then the purchase made by that individual will not be within paragraph 3, unless there are other characteristics of the transaction, for example business accounts drawn up, or a business plan, that bring it within it. The transaction will therefore be relevant to paragraph 2, and if the individual does not own an existing dwelling, the supplement will not be payable.

24.However, if an individual does not own an existing dwelling and buys a dwelling through a business they run and the sole or main activity of the business is buying or investing in property, then the purchase will be relevant to paragraph 3 and so the supplement will be payable. For example, the individual’s business could already own a number of non-residential properties and when that business purchases its first dwelling, the supplement will be payable on the purchase price.

25.Paragraph 3 of schedule 17 to the 2013 Act (chargeable interests treated as being held by partners etc.) applies to schedule 2A as it applies to the rest of the 2013 Act, where the buyer is a partnership within the meaning of paragraph 2 of schedule 17. Chargeable transactions where the purchaser is a partnership will, therefore, be relevant to paragraph 3 if they are made in the course of the business mentioned in paragraph 22, and if they are not made in the course of such a business, such purchases will be relevant to paragraph 2.

26.Purchases by trustees, unless a beneficiary of the trust has an interest in the dwelling bought (or, if more than one is bought in the same transaction, all of them) that is similar to that of an owner of the dwelling, will be relevant to paragraph 3. If the trust beneficiary does have an interest similar to that of an owner of the dwelling, that beneficiary will be treated as the buyer and (unless other conditions in paragraph 3 apply) the transaction will be relevant to paragraph 2.

27.As with paragraph 2, paragraph 3 only applies if the relevant consideration (usually the purchase price) for the transaction is £40,000 or more.

28.Also as with paragraph 2, the reference to “chargeable transaction” means that, where a transaction is exempt or where 100% relief applies, the transaction will not be subject to schedule 2A. For example, charities relief under schedule 13 to the 2013 Act provides for 100% relief.

29.The key difference from paragraph 2 is for cases that fall within paragraph 3 the additional amount of tax in schedule 2A is relevant even where the legal buyer only owns one dwelling at the end of the effective date. In other words, the replacement of main residence test is not relevant. This is principally for anti-avoidance reasons because if schedule 2A were to apply to individuals only there would be an incentive for individuals to purchase dwellings via a corporate “wrapper” or “envelope”.

30.Interpretative provisions of the 2013 Act relevant to paragraph 3—

“buyer”section 7
“chargeable transaction”section 15
“dwelling”Part 6 of schedule 5
“relevant consideration”paragraph 4 of schedule 2A
“subject-matter”section 61.
6

The singular “individual” includes the plural “individuals” by virtue of section 22 of the Interpretation and Legislative Reform (Scotland) Act 2010.

7

This definition is similar to the definition of “property investment partnership” in paragraph 31 of schedule 17 to the 2013 Act.

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Text created by the Scottish Executive department responsible for the subject matter of the Act to explain what the Act sets out to achieve and to make the Act accessible to readers who are not legally qualified. Explanatory Notes were introduced in 1999 and accompany all Acts of the Scottish Parliament except those which result from Budget Bills

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