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

A5 – Working Group Discussion – Nil Returns

1. There was strong consensus that nil returns should not be required where no changes have occurred. Participants argued that the current system imposes unnecessary costs and administrative burden on taxpayers and agents. Suggestions included replacing nil returns with a simple tick-box declaration.

Arguments Against Requiring Nil Returns

2. Under the current legislation, taxpayers must submit a nil return where the Net Present Value (NPV) of the lease exceeds £40,000, even where no tax is due.

3. Participants noted that preparing a nil return can be just as burdensome as completing a full return, since it still requires taxpayers to locate historical lease information and navigate the SETS system. This process was frequently described as onerous and confusing, particularly for small businesses and tenants without legal or tax representation.

4. In many cases, clients incur professional fees simply to submit these nil returns, despite no tax being due.

5. A further challenge arises from taxpayer awareness; some individuals assume that reminder letters are fraudulent, which contributes to confusion, delays, and avoidable costs. The SETS system itself was often characterised as cumbersome and not intuitive for occasional users, prompting suggestions that a simple tick‑box declaration confirming that nothing has changed would be a more proportionate alternative.

6. Participants also highlighted that many taxpayers are unaware of the ongoing obligation to file nil returns, especially where they were not involved in the original lease transaction or where the submission was handled by the landlord’s agent. This lack of awareness has led to unintended non‑compliance and the imposition of penalties, which were widely regarded as unfair in situations where no tax is ultimately due.

Suggestions for Reform

7. The working group’s preference was to remove entirely the requirement that nil returns be submitted, especially for leases with fixed rents and no changes. As an alternative, there was a proposal to introduce a de minimis threshold below which nil returns would not be required, and/or to allow for simplified declarations for unchanged leases.

8. There were also some calls for improvements in communication and reminders from RS, including automated notices to tenants.