Revenue Scotland has introduced guidance for the new tax relief on Green Freeports which came into effect on 1 October 2023. Claims for relief can be made once tax sites have been designated though the date for this is yet to be confirmed.
A Green Freeport is a large, zoned area within a defined boundary which includes a rail, sea or airport link. They have four main objectives:
- Promoting regeneration and high-quality job creation.
- Promoting decarbonisation and a just transition to a net zero economy.
- Establishing hubs for global trade and investment.
- Fostering an innovative environment.
Land and Buildings Transaction Tax (LBTT) relief is available as full or partial relief for Green Freeports.
- Full relief is available when at least 90% of the chargeable consideration for the transaction relates to qualifying land on a designated Green Freeport tax site.
- Partial relief is available when at least 10% of the chargeable consideration for the transaction relates to qualifying land on a designated Green Freeport tax site.
- Relief is only available if the land purchaser intends it to be used exclusively in a qualifying manner.
- No relief is available if less than 10% of the chargeable consideration is attributable to qualifying Green Freeport land.
Qualifying land use
To meet the definition of qualifying use, the buyer or a Connected person must:
- Use the land in the course of a commercial trade or profession.
- Develop or redevelop the land for use by any person in the course of a commercial trade or profession, i.e. a property rental business carried on commercially with a view to a profit.
- Exploit the land, in the course of a commercial trade or profession, as a source of rents or other receipts (other than excluded rents).
The following exclusions apply:
- Land used as a Dwelling or as the garden or grounds of a dwelling.
- Land developed or redeveloped to become residential property.
- Land used as a source of rent or other receipts where the use is as a dwelling or as the garden or grounds of a dwelling.
- Land held as stock of the business for resale without development or redevelopment.
For the purposes of the qualifying use conditions, factors to consider in determining if development has taken place include, but are not limited to:
- Construction work.
- Management of development activities.
At the point of claim, a buyer or lessee might intend to use the land in a qualifying manner, e.g. by developing at some point in the future within the control period. Factors that might suggest the intent to develop include but are not limited to:
- Seeking planning permission.
- Design Work.
Full relief
Full relief from LBTT is available for land transactions where:
- At least 90% of the chargeable consideration for the transaction is attributable to qualifying Green Freeport land and
- The effective date is within the period 1 October 2023 and 30 September 2028.
Examples
- Full relief: 100% chargeable consideration attributable to qualifying green freeport land
- A buyer acquires 30 acres of land for £3,000,000. All 30 acres are within a designated Green Freeport tax site. The buyer’s intention is to use all 30 acres in a qualifying manner.
- As the transaction land is 100% within the Green Freeport tax site and it is to be used exclusively in a qualifying manner, full relief is available.
- Full relief: at least 90% chargeable consideration attributable to qualifying green freeport land
- A buyer acquires 30 acres of land for £3,000,000. Only 27 acres (90%) are within the designated Green Freeport tax site. The intention is to use all 27 acres in a qualifying manner.
- The remaining three acres are outside the Green Freeport tax site and will not be used in a qualifying manner. As the transaction land is 90% within the Green Freeport tax site and it is to be used exclusively in a qualifying manner, full relief is available.
- Full relief: at least 90% chargeable consideration attributable to qualifying green freeport land, just and reasonable apportionment
- A buyer acquires 30 acres of land for £3,000,000. Only 24 acres (80%) are within the designated Green Freeport tax site. The intention is to use all 24 acres in a qualifying manner.
- The remaining six acres are outside the Green Freeport tax site and will not be used in a qualifying manner. However, the valuation on a just and reasonable basis in this case for the 24 acres is £2,850,000. This is 95% of the total chargeable consideration of £3,000,000. A valuation is available to evidence this.
- As 95% of the chargeable consideration meets qualifying conditions full relief is available.
Partial relief
Partial relief from LBTT is available for transactions where:
- At least 10% of the chargeable consideration is attributable to qualifying Green Freeport land and
- The effective date is within the period 1 October 2023 and 30 September 2028.
The tax chargeable for the transaction is reduced by the relevant proportion. Relief is calculated on a just and reasonable apportionment of the chargeable consideration for qualifying Green Freeport land. Evidence of the apportionment valuation must be available.
Examples
- Partial relief
- A buyer acquires eight acres of land at a cost of £185,000 per acre, (£1,480,000). All eight acres are within designated green freeport tax site land.
- Only five acres are intended to be used in a qualifying manner. These five acres represent 62.5% of the total chargeable consideration or £925,000.
- As this is more than 10% but less than 90% only partial relief is available.
- Only the five acres used in a qualifying manner meet the conditions for the relief. Therefore, the relief available is restricted to 62.5% of the tax due.
- Partial relief just above 10% lower limit
- A buyer acquires 20 acres of land for £1,375,000. All 20 acres are within a Green Freeport, however, only three acres are inside a designated tax site. The intention is to use the three acres in a qualifying manner.
- Only the land within a designated tax site meets the criteria to be considered for relief. The value on a just and reasonable apportionment for the three acres is £138,050, or 10.04% of the total chargeable consideration. The taxpayer must be able to evidence the just and reasonable apportionment.
- As more than 10% of the chargeable consideration meets the qualifying conditions partial relief is available.
- Only the three acres used in a qualifying manner meet the conditions for the relief. Therefore, the relief available is restricted to 10.04% of the tax due.
Withdrawal of relief
Relief may be withdrawn where land is not exclusively used in a qualifying manner during the control period.
The control period means the shorter of:
- Three years beginning with the effective date of the transaction.
- The period beginning with the effective date of the transaction, and ending with a later effective date which leads to neither the buyer nor a connected person holding a chargeable interest in the qualifying Green Freeport land.
Where the following exceptions apply, relief will not be withdrawn:
- Unforeseen circumstances beyond the buyer’s control mean that it is not reasonable to expect the land to be exclusively used in a qualifying manner.
- A qualifying use has not yet begun, but reasonable steps are being taken to ensure that the land is used in a qualifying manner.
- The use of all or part of the land in a qualifying manner has ceased, but reasonable steps are being taken:
- To ensure that it is used in that manner.
- To dispose of all chargeable interests in the land or part of the land held by the buyer and connected persons in a timely manner.
Where the buyer ceases to hold a chargeable interest in part of qualifying Green Freeport land during the control period, withdrawal of relief is not applicable.
Tax chargeable on withdrawal of relief
Where LBTT Green Freeport relief is withdrawn, the tax payable is what would have been payable in respect of the original transaction.
On the withdrawal of the relief, it is the responsibility of the buyer to make a further LBTT return within 30 days of the qualifying use ending.
Useful guides on this topic
Freeports: Tax breaks
What are Freeports? Where are they located? What are the tax advantages?
LBTT: Land and Buildings Transaction Tax (LBTT)
Land and Buildings Transaction Tax (LBTT) is a tax on transactions in land situated in Scotland. It replaced Stamp Duty Land Tax (SDLT) on 1 April 2015.
LBTT: Multiple Dwellings Relief
What is Multiple Dwellings Relief (MDR) for Land and Building Transactions Tax purposes? When does it apply and how is it claimed? What are the differences between MDR for SDLT and LBTT?
External links
Schedule 16D Green Freeports Relief
Land & Building Transaction Tax (Scotland) Act 2013, (LBTT(S)(A) 2013)
Revenue Scotland and Tax Powers Act 2014 (RSTPA 2014)
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