Devolution means that Scotland and Wales each now have their own, separate tax regimes and the property tax rules for purchases in both countries have changed. We advise you to pay close attention to ensure the correct procedures are followed, especially when buying property and land that crosses UK borders. In such cases, special rules apply.
The most recent development in devolved property tax affects Wales, where Stamp Duty Land Tax (SDLT) was replaced by Land Transaction Tax (LTT) for purchases on or after 1 April 2018. In Scotland, SDLT was replaced by Land and Buildings Transaction Tax (LBTT) for purchases on or after 1 April 2015.
The existence of different UK tax regimes means it is now possible for a transaction to become liable to more than one property tax. This could happen in one of two ways:
- Where a single property, comprising land on both sides of the English-Scottish or English-Welsh border, is purchased. For example, this could be a farm with land that straddles both sides of a border.
- Where there is a ‘multiple property transaction’. This would be the case where there is a single agreed amount of consideration for the purchase of two or more properties in different UK tax jurisdictions – whether as a single transaction or a number of connected transactions. As an example, a purchaser would be liable for more than one property tax if, for example, they acquire a business which includes three shops (one in Wales, one in Scotland, and one in England) or a holiday accommodation business comprising properties on both sides of the Scottish border.
In cases such as these, the total consideration must be divided or apportioned on a just and reasonable basis to determine the appropriate consideration for the part in each UK tax jurisdiction. As with any tax matter, the relevant tax authority – HMRC, the Welsh Revenue Authority (WRA) or Revenue Scotland (RS) – have the powers to challenge any return made, or query the basis on which apportionment was made.
Cross-border property tax – an example
A farm in Powys is being sold. The entire property comprises 20 fields, a farmhouse, a bungalow and agricultural buildings. Nine fields lie wholly in England, nine wholly in Wales, and two in both England and Wales. In this case, apportionment would need to take into account where buildings are located and the nature of the buildings. Any parts of the land that may be more valuable because of location, access, use or development (such as field drainage) must also be considered.
Where the consideration (as apportioned) is more than the limit for notification to the relevant tax authority, a return must be submitted. Up to three tax returns could potentially be needed for each country’s property tax (SDLT, LBTT and LTT). Payment of these would then be made to three different tax authorities: HMRC, the WRA and RS.
Calculating the property tax payable on transactions across UK borders is undoubtedly a complex area. We will be happy to provide assistance in relation to the apportionment of consideration. We can also provide advice if you need to claim private residence relief for capital gains tax purposes.
For further advice regarding property tax rules, private residence relief and capital gains tax, please speak to your usual advisor. Alternatively, contact one of our offices or enquire online.
For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.