In Archer (UK) Limited v Revenue Scotland [2025] FTSTC 10, the First Tier Tribunal (FTT) for Scotland found that a Minute of Variation to extend a lease originally granted under the Stamp Duty Land Tax (SDLT) regime was not a deemed new lease for Land and Buildings Transaction Tax (LBTT) purposes. No LBTT was due.
Starting 9 June and ending 10 July 2020, Archer (UK) Limited (the taxpayer) and its landlord executed a Minute of Variation to extend the term of the lease for their premises by five years.
- The lease was originally executed in 2014, when Stamp Duty Land Tax (SDLT) applied in Scotland.
On 21 December 2020, a Land and Buildings Transaction Tax (LBTT) return for the transaction was filed, and the self-assessed LBTT paid.
- At this point, both parties believed that the Minute meant that there was a deemed new lease under Article 13 of The Land and Buildings Transaction Tax (Transitional Provisions) (Scotland) Order 2014.
On 5 February 2021, because of uncertainty in the legislation, the taxpayer’s agents wrote to Revenue Scotland to seek their opinion on how the Net Present Value (NPV) of the lease extension was to be calculated.
- The taxpayer made the calculation with reference to the effective date of the land transaction in question, i.e. the date the Minute was executed.
- Revenue Scotland replied on 7 December 2021, indicating that they considered the taxpayer’s SDLT analysis to be correct but said that the matter remained under consideration.
On 1 July 2022, Revenue Scotland issued an enquiry notice on the LBTT return and requested further information.
- Revenue Scotland issued a closure notice on 2 August 2023 and amended the return to show LBTT due where the NPV calculation was based on the date the original lease ended. This resulted in an increase of £65,352 in LBTT owed.
The taxpayer requested a Review on 29 September 2023.
- Revenue Scotland upheld their decision in their review conclusion letter dated 15 December 2023.
- The taxpayer subsequently instructed a new firm of solicitors, and on 11 January 2024, the taxpayer appealed to the First Tier Tribunal (FTT).
On 15 January 2024, the taxpayer made a claim for Overpayment relief on the basis that the lease extension did not fall within Article 13 and so no deemed land transaction had occurred.
- On 8 February 2024, Revenue Scotland opened an enquiry into the claim. Their closure notice dated 16 February 2024 refused the claim.
- On 15 March 2024, the taxpayer appealed the refusal to the FTT.
The FTT found that:
- Under Scottish law, the extension to the lease was not the grant of a new lease, and there was nothing in the LBTT transitional statutory provisions that meant it should be treated otherwise.
- The question was whether the Minute, if it had been executed before 1 April 2015 (when LBTT replaced SDLT), would have been deemed to have been the grant of a new lease for the purposes of Schedule 17A in Finance Act 2003.
- Schedule 17A does not contain any specific provisions in relation to lease extensions. The FTT considered that a Scots lawyer reading Schedule 17A would be entitled to think that Article 13 did not apply.
- While Revenue Scotland’s Transitional Guidance and HMRC’s SDLT guidance indicated otherwise, the FTT dismissed the guidance on the basis that it was only the relevant authority’s view of the law. A tax liability can only be imposed by statute.
- If Article 13 had meant that there was a deemed new lease, it commenced on the effective date of the Minute of Variation. If it were required, the NPV calculation should be made from that date.
- Revenue Scotland had been inconsistent in their view of when the deemed new lease started. They based the NPV calculation on the date the original lease terminated. However, they used the effective date of the Minute to charge a late filing penalty in 2023 for the taxpayer failing to submit a three-year lease review return on time.
The appeals succeeded on both issues.
Comment
This is a significant decision, which may result in scope for LBTT repayment claims where tenants have extended pre-April 2015 leases and potentially overpaid LBTT.
It would seem likely that Revenue Scotland will appeal the decision. In an update on 11 August, Revenue Scotland stated that the decision “raises complex questions” and they are “considering it carefully”. The Scottish Government are also considering the implications of the decision.
In the meantime, Revenue Scotland is continuing to operate in accordance with its guidance at LBTT6050.
Advisers and taxpayers should watch for updates in this area, paying close attention to claim deadlines if a repayment of LBTT may be sought at some point in the future.
Useful guides on this topic
LBTT: Land and Buildings Transaction Tax
What is Land and Buildings Transaction Tax (LBTT)? What are the rules?
LBTT vs SDLT: Comparing the rates and additional dwellings charge
How does LBTT compare to SDLT? What are the key differences?
Statutory Review by Revenue Scotland
What is a Statutory Review? What is an appealable decision? How do I request a review? What is the review process?
Overpayment Relief
What is Overpayment Relief? When can you claim Overpayment Relief? What are the conditions for a claim for Overpayment Relief? What are the time limits for a claim for Overpayment Relief?
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