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

A2 - Revenue Scotland Administration And Data On Three Yearly Lease Reviews

Operational Experience and Filing Rates

1. RS has more than seven years operational experience implementing three yearly lease reviews (as the first review period arose in 2018).

2. RS reports that the review process has been persistently challenging to operate due to many factors, but notably the low on-time return rate. Despite introduction of a dedicated team in 2021 deploying various methods to rectify this. To date around 36% of three yearly review returns are not filed.

3. This results in taxpayers incurring penalties for failing to file a return, including where returns are filed late. Where additional tax is due, a penalty may also be incurred for failure to pay tax on time.

Taxpayer Awareness, Behaviour and Engagement

4. Anecdotal feedback gathered by Revenue Scotland and the Scottish Government indicates a range of issues affecting taxpayer engagement with the three‑yearly review regime.

5. Many taxpayers remain unaware that the regime exists or that they have ongoing obligations in relation to their non‑residential leases. Some appear to take the view that any penalties incurred will be lower than the potential tax due and therefore choose not to submit a return at all; in some instances, taxpayers have even paid the penalty but still not completed the required filing.

6. Others report lacking the confidence or knowledge to submit a return without professional assistance yet have indicated that they are reluctant to engage an agent because of concerns about the associated costs.

Lease Review Outcomes and Changes in Tax Liability

7. Data to end-June 2025 shows that 75% of all submitted lease reviews result in no change to the original tax position. Of the remainder, 18% of lease reviews resulted in an additional tax liability whilst 7% resulted in repayment of LBTT.

8. Of those lease reviews which were received late, and incurred a penalty as a result, 65% reported no change in tax, 29% reported further tax to pay and 6% reported that a repayment was due.

NPV Thresholds and Movement Between Chargeable and Non-chargeable Status

9. Analysis of all‑time data to 30 June 2025 shows that patterns of movement between chargeable and non‑chargeable leases tend to cluster around the £150,000 NPV threshold.

10. Overall, a small proportion of leases change taxable status at review. Around 6% of leases originally falling within the non‑chargeable £40,000–£150,000 range became chargeable at their latest review, while 2% of those that were chargeable at the outset moved into non‑chargeable territory.

11. This switching of status is most common in the bands closest to the threshold - between £120,000 and £190,000 - where relatively small changes in NPV can tip leases over or under the chargeable threshold.

12. Notably, 22% of leases in the highest non‑chargeable band (£140,000–£150,000) became chargeable at review, while 16% in the lowest chargeable band (£150,000–£160,000) reverted to non‑chargeable. Across all reviews received to date, 59% related to leases that were notifiable but did not attract any tax.

Penalties Issued and Distribution Across NPV Bands

13. Data on late filing penalties issued between November 2023 and June 2025 presents a similar picture. Over this period, RS issued around 4,800 late filing penalties across approximately 3,300 leases or lease review returns within the £40,000–£150,000 NPV range, with the total value of these penalties amounting to £1.8 million.

14. Around 31% of all late filing penalties issued during this period related to leases in this non‑chargeable band, consistent with 32% of the overall penalty value. In addition, 16% of penalties issued for leases in this NPV range were later matched to a lease review return submitted after the penalty had been triggered; a pattern broadly in line with late‑filing behaviour across the wider lease population.

15. Penalties as they apply to leases are discussed in more detail in subsection A6.

Administrative Burden and Resource Considerations

16. The resource being applied within RS to make the regime work in practice is high in relation to the revenue it has generated to date. However, revenue generated is only one measure of considering the success of an overall tax policy. An important function of the three-yearly review process is equally providing for a repayment of tax where, on review, a lease is no longer liable to LBTT.