In Archer (UK) Ltd v Rev Scot [2025] FTSTC 10, the Scottish First-tier Tribunal (Tax) (FTT) held that minutes of variation to extend the term of a lease originally granted under the stamp duty land tax (SDLT) regime did not give rise to a deemed grant of a new lease for Land and Buildings Transaction Tax (LBTT) under Article 13 of the Land and Buildings Transaction Tax (Transitional Provisions) (Scotland) Order 2014 (Article 13). Article 13 provides that a new lease is granted for LBTT purposes where:
- A Scottish lease subject to SDLT at the time of its grant is varied from 1 April 2015 to increase the term of the lease (or extend the premises let); and
- Had such a variation occurred immediately prior to 1 April 2015 it would have been treated as a grant of a new lease for SDLT purposes under Schedule 17A, Finance Act 2003 (FA 2003).
In this case, the taxpayer, Archer (UK) Ltd, leased commercial premises in Aberdeen from December 2013 for a term of 20 years but in July 2020, the lease was extended by five years to 2038 pursuant to minutes of variation.
Initially, the taxpayer considered that a new lease was granted for LBTT purposes under Article 13. However, after a dispute arose with Revenue Scotland in relation to the method of calculating the net present value (NPV) of rent subject to the LBTT charge, the taxpayer argued the variation did not give rise to a new lease under Article 13 and applied to recover the LBTT paid from Revenue Scotland.
The application was refused such that the taxpayer appealed to the FTT. It argued that there was nothing expressed in Schedule 17A or FA 2003 which specifically brought the variation to extend a Scottish lease into the SDLT charge as a grant of a new lease immediately prior to 1 April 2015. While HMRC’s guidance had, historically, treated variations to extend Scottish leases pre-April 2015 as lease surrender and regrants, this guidance did not have the force of law. Furthermore, it only reflected the English land law position (which treated variations to extend the term or demise of a lease as an implied lease surrender and regrant) which did not align with the Scots land law position. Therefore, in absence of a specific provision in FA 2003 (or subsequently in the LBTT legislation) which aligned the Scots land law position with the English land law, the taxpayer argued that the requirement for a new lease to arise under Article 13 was not met.
The FTT agreed with the taxpayer. Although HMRC published guidance had support from the Law Society of Scotland to ensure parity in the SDLT treatment of English and Scottish leases, neither had the legal mandate to impose this charge on such variations. Furthermore, while the Scottish Parliament may have intended to treat such variations as grants of new leases for LBTT purposes, the choice of drafting for Article 13 did not support this. As such, the FTT were not prepared to “cross the boundary between construction and legislation” to read into Article 13 an imposition of a statutory liability to SDLT under Schedule 17A on Scottish lease variations pre-April 2015 in order to give rise to a new lease subject to LBTT.
It is unclear if Revenue Scotland will appeal the decision or whether the Scottish Parliament will amend Article 13 to bring these variations into the LBTT charge. In the meantime, taxpayers who have already paid LBTT on variation to extend the term or demise of Scottish leases granted pre-April 2015 should carefully consider their eligibility for a refund.