Land and Buildings Transaction Tax review: Scottish government policy evaluation 2025-2026

B2 - Working Group Findings – Summary of Evidence

1. Participants highlighted the ongoing difficulty of interpreting what constitutes “exceptional circumstances” within tax legislation. Although HMRC guidance under SDLT includes provisions for exceptional circumstances, these are applied narrowly in practice, typically only in cases involving major external events. Case law demonstrates that legal interpretation can be broader than administrative guidance, illustrating the inherent ambiguity of the concept.

2. Participants also noted that many taxpayers may regard situations such as illness, bereavement or financial hardship as exceptional. However, tax legislation requires clear and objective criteria, creating challenges in accommodating highly individualised circumstances without introducing inconsistency or subjectivity.

3. Concerns were raised about the operational implications for RS, particularly in relation to the assessment of medical or personal evidence, which staff may not be equipped to evaluate. This carries risks of variable decision‑making, administrative burden, and potential avoidance.

4. A distinction was identified between individual exceptional circumstances (e.g. personal hardship) and group‑based events (e.g. cladding or RAAC issues, or wider national disruptions). Group‑based scenarios were viewed as more suitable for targeted legislative interventions, as they can be more clearly defined.

5. However, even within these categories, taxpayer behaviour may still require assessment, including whether reasonable steps were taken to address the underlying issue. This limits the extent to which group‑based relief can fully avoid case‑by‑case judgments.

6. Evidence requirements were identified as a significant practical and ethical challenge, particularly in highly sensitive circumstances such as domestic abuse or disability‑related purchases. In such cases, obtaining and verifying documentation may be difficult or inappropriate, and could involve sensitive personal data relating to third parties.

7. Participants expressed broad support for exploring relief provisions at least in line with those available under SDLT and LTT, with some favouring more expansive measures. Issues of comparability with SDLT were noted, including differences in the treatment of inherited properties and cohabitants, the latter of which can result in more households being subject to ADS under LBTT.

8. Overall, there was a view that any mechanism for recognising exceptional circumstances must balance compassion with clarity, enforceability, and protection against avoidance.

Group and Individual Circumstances

9. Participants considered the distinction between group‑based and individual circumstances as a potentially useful framework for identifying appropriate policy responses. Group-based events such as cladding defects, RAAC, or pandemic‑related restrictions were viewed as more suitable for defined legislative reliefs that apply to affected cohorts.

10. However, it was acknowledged that even within defined groups, individual circumstances can vary significantly. For example, owners of similar properties might experience different delays or remediation options depending on the steps taken to resolve the issue. As a result, some level of individual assessment may remain necessary, which continues to present administrative and consistency challenges.

11. Concerns were also raised that poorly defined group-based reliefs could invite avoidance behaviours or incentivise attempts to fall artificially within qualifying categories. Safeguards and clear eligibility criteria were therefore considered essential.

Alternative Mechanisms – Provisional Relief

12. The possibility of introducing a provisional or conditional form of relief was examined. Under such an approach, ADS liability could be suspended or deferred pending the occurrence of specific future events for example, the sale of a previous main residence or the resolution of a structural issue. This was compared with existing mechanisms such as sub‑sale development relief under LBTT and rollover relief in Capital Gains Tax.

13. While a provisional approach could offer greater flexibility for taxpayers experiencing temporary difficulties, significant administrative challenges were identified. These include long‑term monitoring of conditions, reassessing cases after extended periods, and the risk of speculative claims. Additional complexities arise from the requirement for LBTT to be paid before property registration, meaning legislative change or procedural adjustments would be required.

14. Although conceptually attractive in some circumstances, participants considered that any provisional relief mechanism would need careful design, strong legislative underpinning, and clear guidance to ensure consistency and prevent misuse.

Evidence, Fairness and Ethical Considerations

15. Participants emphasised that any approach to exceptional circumstances must be supported by verifiable evidence while avoiding processes that could cause harm or place unreasonable burdens on taxpayers.

16. Situations involving domestic abuse or protected medical information were highlighted as areas requiring particular sensitivity. It was agreed that fairness considerations must extend beyond evidential requirements to include the wider ethical implications of expecting individuals to substantiate deeply personal circumstances.

Categorisation of Exceptional Circumstances

17. A structured categorisation model was identified as potentially helpful for organising different types of exceptional circumstances. Four broad categories were proposed:

• Personal circumstances (e.g. illness, domestic abuse, bereavement)
• Property‑related circumstances (e.g. cladding, RAAC, safety restrictions)
• Transactional circumstances (e.g. chain collapse, third‑party delays)
• Societal circumstances (e.g. pandemics, government‑imposed restrictions)

18. Participants noted that such a framework could help target relief mechanisms more effectively and identify where external expertise might be required. However, it was also recognised that many real‑world cases may span multiple categories, and that overly rigid classifications risk excluding legitimate scenarios.

19. Flexibility and discretion were therefore considered essential design principles.

Appeals and Administrative Process

20. Participants noted significant differences in the appeal rights associated with exceptional circumstances provisions across the UK. Under SDLT, decisions on exceptional circumstances claims do not carry a statutory right of appeal, creating a closed administrative process. In contrast, the Welsh system under LTT allows taxpayers to appeal through the tribunal structure.

21. There was strong consensus that any Scottish provision should include a formal right of appeal to ensure fairness, accountability, and public confidence. Without such a mechanism, taxpayers would be left with judicial review as the only recourse; an option that is costly, time‑consuming, and not well‑suited to resolving disputes of this nature.