This guide sets out the basic principles of land transaction tax (LTT) on commercial property.

This guide was updated in March 2018

LTT is charged on property transactions which involve land located in Wales where the 'effective date' is on or after 1 April 2018. Until this time Stamp Duty Land Tax (SDLT) is payable in respect of land in Wales. Land transactions in Scotland are subject to Scottish Land and Buildings Transaction Tax (LBTT).

LTT is collected and administered by the Welsh Revenue Authority (WRA).

LTT is very similar to SDLT and LBTT but there are a few differences, which will be highlighted in this guide.

Like SDLT and LBTT, LTT is charged on the substance of a property transaction rather than the type of document which gives rise to the transaction. It arises irrespective of the nature or effect of particular documents, and there need not be any document for a charge to arise.

What are the main characteristics of LTT?

LTT is payable on land transactions where the land is in Wales, regardless of where any contract or transfer document is executed. If land is partly in England and partly in Wales, LTT will apply to the part of the land which is in Wales.

A 'land transaction' is any 'acquisition of a chargeable interest'. This is widely defined and can include the transfer of a freehold interest and the grant, assignment, variation or surrender of a lease as well as some other less common transactions.

Exempt interests are not subject to LTT. These include a licence to use or occupy land and a tenancy at will.

When is it payable?

LTT liability is triggered on the 'effective date' of the land transaction. LTT must be paid within 30 days after this date in order to avoid interest and penalties. The effective date is usually either the date the contract is completed, or on substantial performance of a contract or an agreement for lease, if earlier.

Substantial performance occurs when the buyer or tenant takes possession of the land or a substantial part of the consideration is paid. It does not matter whether possession is under a contract, licence, temporary lease or tenancy at will. The legislation does not define 'substantial'. Where any part of the consideration is rent, the payment of the first payment of rent will trigger substantial performance.

What is it charged on?

LTT is payable on 'chargeable consideration'. This includes both the money and 'money's worth' which is given directly or indirectly by the purchaser or a connected person. It can also include the release or transfer of a debt. Any VAT payable in respect of the transaction is regarded as chargeable consideration. This means that, effectively, you pay LTT on VAT.

In terms of leases, LTT is payable on any premium and the rent and there are different rules for each. However LTT can be payable in respect of other payments made under the lease, or on non-cash consideration such as agreeing to do building works.

Where a contingency affects the eventual amount of consideration that will ultimately be due, purchasers must calculate LTT on the basis that the contingent amount will be payable. However an application to defer the LTT payable on contingent amounts can be made in some circumstances.

Where the consideration is uncertain or has not yet been ascertained, purchasers must make a reasonable estimate of the final consideration as at the effective date of the transaction and pay LTT on that basis. This could happen where, for example, the consideration is based on profits in accounts which have not yet been drawn up. Once the consideration becomes certain or ascertained a further land transaction return will need to be submitted to WRA and any additional LTT paid or overpayment reclaimed.

What are the rates of LTT?

On freehold transfers or lease premiums in respect of commercial property



The portion up to and including £150,000


The portion over £150,000 up to and including £250,000


The portion over £250,000 up to and including  £1m


The portion over £1m


Remember that LTT is payable on the VAT-inclusive amount.

If the rent for a commercial property exceeds £9,000 per annum, the nil rate of LTT will not be available when calculating the LTT on the premium. 

There are different rates for residential property, including a higher rate for second residential properties.

On rent

In the case of rent, LTT is charged on the net present value (NPV) of the rent payable over the term of the lease. If VAT is payable on the rent, you will have to include the VAT when calculating the NPV. WRA has provided a calculator which will calculate both the NPV of rental payments and the LTT charged on that rent.

Essentially, if the term of the lease exceeds five years, the NPV is calculated by reference to the actual rent payable for each of the first five years of the lease and then for the remainder of the term the rent is taken to be the highest rent payable in respect of any continuous 12-month period during the first five years of the term of the lease. No account is taken in this initial calculation of any rent increases or reductions after the first five years of the term - whether set out in the lease or otherwise occurring.

The LTT chargeable on the NPV amounts for commercial property is calculated using the following bands. Again, different thresholds apply for residential property.



The portion up to and including £150,000


The portion over £150,000 up to and including £2m


The portion over £2m


If there is a rent review or variation provided for in the lease within the first five years of the term then the initial NPV calculation should take into account a reasonable estimate of the rent which will payable after this review or variation. The NPV will then be recalculated using the actual rent figures at the end of the fifth year of the term or once the rent for the first five years becomes certain, if that happens earlier. Again, the highest 12-month figure in the first five years is used for the NPV calculation for the period of the term after the first five years. If this recalculation results in more LTT being due, the land transaction return has to be amended and the additional LTT paid.

No LTT is payable on the rent for a residential lease.

What about linked transactions?

If transactions are linked, the LTT calculation is more complicated. Transactions will be 'linked' if they form a single scheme, arrangement or series of transactions between the same parties or connected persons. This will be the case irrespective of the dates the transactions are entered into. If transactions are linked LTT will be calculated as if the consideration for all linked transactions was amalgamated. This prevents transactions being split to take advantage of the nil rate band or a lower rate of LTT.

Land in Wales will not be treated as linked for LTT purposes with land in England or Scotland.

In the case of leases, the tax treatment depends on whether they are linked by way of a single scheme or arrangement or as a series of successive linked leases.

LTT on successive linked leases is calculated as though the series of leases were one lease granted:

  • at the time the first lease in the series was granted;
  • for a term equal to the aggregate of terms of all the leases in the series; and
  • in consideration of the rent payable under all of the leases in the series.

Where leases are linked but are not successive – for example, if leases of two neighbouring properties are granted by the same landlord to the same tenant – then the NPV of each lease will be aggregated for the purpose of applying the thresholds.

What happens where there is an agreement for lease?

Where an agreement for lease is substantially performed – for example, by the tenant going into occupation of the premises – a notional lease is treated as having begun on the date of that substantial performance. LTT is calculated on this notional lease with the term running until the end of the term agreed in the agreement for lease. When the lease is actually granted the notional lease is treated as running from the date of substantial performance of the agreement for lease until the date of expiry of the actual lease in consideration of the total rent payable under the agreement for lease and the actual lease. This means that unless the terms of the actual lease differ from the agreement for lease there should be no further LTT filing obligation once the actual lease is granted.

An agreement for lease that is not substantially performed will be ignored for LTT purposes and LTT will be payable only by reference to the grant of the actual lease.

What if an existing lease is held over?

Where a lease is held over after the end of its term and a new lease is then granted, the LTT position can be complicated and advice should be sought. In some circumstances the position is slightly different to that under SDLT.

What about intra group transactions?

The basic principle is that land transactions between group companies are eligible for relief. However, that relief must be claimed. Broadly, companies are members of the same group if one is the 75% subsidiary of the other or both are 75% subsidiaries of a third company.

However there are anti-avoidance provisions which prevent the relief being available in some circumstances. WRA can also claw back LTT relief in certain circumstances if within three years there are changes in the ownership of the purchaser.

Is there a sub-sale relief?

There is a relief for sub-sales.

What about properties held in companies?

There are no specific rules concerning commercial properties held through companies or special purpose vehicles (SPVs). If the shares in such companies are sold rather than the underlying property then stamp duty will be payable at 0.5% rather than LTT.

There are no special rules where residential properties are held through companies.  This differs from SDLT which is charged at a higher rate where residential property costing more than £500,000 is purchased by certain non-natural persons, such as companies.  

However, the annual tax on enveloped dwellings (ATED) is charged annually on high value UK residential property held by certain non-natural persons, such as companies. For more details see our Out-Law guide on Taxes on High Value Residential Property.

What are the payment/filing obligations?

There is a statutory obligation on the purchaser or tenant to submit a land transaction return and pay LTT, if due, within 30 days of the effective date of a notifiable transaction. Note that if relief is being claimed then the transaction may still be notifiable, even if there is no LTT to pay.

A certificate of LTT paid may be required for the Land Registry in order to register the transaction.

A purchaser or tenant who fails to file a land transaction return by the filing date is subject to penalties. Interest is payable on LTT which remains unpaid within 30 days of the effective date of the transaction.

Are there any anti-avoidance rules?

The anti avoidance rules for LTT differ from those for SDLT. There is no equivalent of SDLT's section 75A. Instead LTT contains a targeted anti avoidance rule (TAAR) which disapplies the application of any LTT relief where a relief is used in connection with tax avoidance arrangements.

A general anti-avoidance rule enables the counteraction of transactions which involve artificial tax avoidance. As an 'anti-avoidance' rule, it is wider that the UK's GAAR which is an 'anti-abuse' rule.

What about transitional rules?

Where the effective date of a transaction is on or after 1 April 2018 but contracts were exchanged on or before 17th December 2014 and the contract has not been varied, SDLT rather than LTT will be payable.

There will be transitional rules to deal with situations where additional liabilities arise in relation to pre-April 2018 leases of properties located in Wales or, for example, pre-April 2018 leases are held over.

English Stamp Duty Land Tax and Scottish Land and Buildings Transaction Tax

SDLT applies to land in Wales before 1 April 2018. In accordance with the transitional rules, there are still some situations where SDLT will still apply in relation to some transactions after 1 April, involving pre-April leases. Seek advice in this situation.

In Scotland, from April 2015, UK SDLT was replaced by a Land and Buildings Transaction Tax (LBTT) collected by the Scottish Government.  LBTT applies to all real estate transactions in Scotland.

For more information on SDLT see our Out-law guide to SDLT on commercial property and for LBTT, see our Out-law guide on Land and Buildings Transaction Tax in Scotland.

What are the differences from SDLT?

Although LTT is very similar to SDLT and LBTT, there are a few differences. The main ones are as follows:

  • the rates are different
  • there are some slight changes in relation to renewal leases which are backdated where the tenant remains in occupation
  • the anti avoidance provisions under LTT are potentially harsher
  • the rent element of newly granted residential leases will be exempt from tax under LTT.

HMRC have given guidance on how it interprets certain provisions of SDLT. This guidance will not apply to the equivalent provisions in LTT. However, the WRA is producing guidance. We have seen with LBTT that some differences to SDLT have arisen in practice, because although the legislation may be very similar, Revenue Scotland have interpreted it in a different way. We may see a similar effect with LTT.


Solicitors acting for buyers will be able to file LTT returns online. They will need to first register with WRA.

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