Land Transaction Tax special tax site relief: technical guidance

(Schedule 21A) 

LTT relief is available for certain purchases of land and buildings in designated special tax sites under Schedule 21A of the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 (LTTA). 

Relief will be available for the purchase of land and buildings in the Celtic Freeport special tax site from 26 November 2024 until 30 September 2029.  

Relief must be claimed in a return or an amendment to a return (section 30(4) LTTA). 

Relief can be claimed for land inside a special tax site if it is intended to be used only in a qualifying manner at the time the land is purchased. 

Once relief is claimed, it does not matter how land that did not qualify for relief – either because it was not to be used in a qualifying manner or because it was outside of the special tax site – is used. 

Subject to certain exceptions, relief is withdrawn if qualifying land ceases to be used in a qualifying manner during the control period. 

Rules for alternative finance arrangements ensure that eligibility for relief is determined by reference to the “relevant person” (the person other than the financial institution who entered into the alternative finance arrangement).

(Paragraphs 1 & 2, Schedule 21A) 

For the purposes of special tax site relief, “transaction land” is a chargeable interest in land which is the subject matter of the transaction. 

The special tax site area for the purposes of LTT relief are taken to be those areas originally designated by the regulations on the date that they are made.  

Changes to the special tax site area will only be reflected if Schedule 21A is updated to reflect these changes. 

(Paragraph 3, Schedule 21A) 

Land which qualifies for special tax site relief is called qualifying land. 

To be qualifying land, land must be situated in a designated special tax site and the land is intended to be used exclusively in a qualifying manner by the buyer. 

To be qualifying, transaction land must be within a special tax site at the time the contract completes, or earlier when the contract is “substantially performed”. Contract completion and substantial performance are considered in further detail at LTTA/2130 onwards. 

Land outside a special tax site will not qualify for tax relief. The consideration attribution rules in paragraph 8 of Schedule 21A do not have the effect of giving relief to transaction land outside of the special tax site. 

Land is intended to be used in a qualifying manner if it meets one or more of the qualifying uses (LTTA/7113) and the intended use is not non-qualifying (LTTA/7114).

(Paragraph 4(1), Schedule 21A) 

Transaction land is used in a qualifying manner if it is used in one or more of the following ways: 

• used by the buyer or a connected person in the course of a commercial trade or profession, 
• developed or redeveloped by the buyer or a connected person for use by any person in the course of a commercial trade or profession, 
• exploited by the buyer or a connected person in the course of a commercial trade or profession as a source of rents or other receipts (other than excluded rents and other receipts)

Connected person means a person who is connected to another person under section 1122 of the Corporation Tax Act 2010. Section 74 of LTTA (references to connected persons) applies to special tax site relief. 

For special tax site relief, commercial means carried out on a commercial basis and with a view to profit. HMRC has further guidance on when a trade or profession is carried out on a commercial basis and with a view to profit (further guidance is available at HMRC’s BIM85705). 

Use in a commercial trade or profession, for the purpose of special tax site, includes use in the course of a property rental business. “Property rental business” has the same meaning as “property business” in the Income Tax (Trading and Other Income) Act 2005. HMRC provides guidance to assist in understanding when an activity amounts to a UK property business (for further guidance see HMRC’s PIM1020). 

“Excluded rents and other receipts” has the same meaning as income within any of classes of 1 to 6 in the table in section 605(2) of the Corporation Tax Act 2010. 

(Paragraph 4(2), Schedule 21A) 

Relief will not be given if transaction land is used in a non-qualifying manner. 

Transaction land is used in a non-qualifying manner if any person uses it in the following ways: 

• it is used as a dwelling or as the garden or grounds of a dwelling (but see LTTA/7115 as an exception to this rule) 
• it is developed or redeveloped to become residential property 
• it is exploited as a source of rents or other receipts payable by a person using the land in a manner that is not a qualifying manner 
• it is held as the stock of a business for resale without development or redevelopment 

Garden or grounds of a dwelling includes any building or structure on that land.

(Paragraph 4(3), Schedule 21A) 

Any part of the transaction land which is used as a dwelling or as the garden or grounds of a dwelling and which is provided to an individual and their family for the better performance of the individual’s employment duties as caretaker or a member of security staff of the transaction land is used in a qualifying manner. 

As explained in HMRC’s EIM11346, the better performance test is an objective one. The buyer has to show that the dwelling is provided to allow the employee to perform their duties better than if the employee lived elsewhere. 

This test will not be met simply because the dwelling is close to the place of employment. It is necessary to consider the employee’s duties as caretaker or as a member of security staff. 

Duties that may demonstrate the better performance test is met in practice include: 

• the employee is required to be on call outside of normal hours and is frequently required out of hours; and 
• the dwelling is provided so that the employee may have quick access to the place of employment should they be called to that place 

(Paragraph 4(4), Schedule 21A) 

Relief may also be claimed for land if its use is ancillary to the use of other land. Land will not qualify for relief as ancillary unless it is used in a way that is necessary to support the other land in question in a qualifying manner. 

To apply, the other land must be situated in a special tax site and used in a qualifying manner. Land is ancillary where it is used, developed or redeveloped in the course of a commercial trade or profession that provides support that is necessary to other land which qualifies for relief in its own right. 

Examples of ancillary use include: 

• access roads to factories and warehouses 
• car parking for factory or office workers

To qualify for relief the ancillary land must also be situated in a special tax site. 

The period for which special tax site relief applies to the Celtic Freeport is from 26 November 2024 to 30 September 2029.  

(Paragraph 6, Schedule 21A) 

A transaction will be fully relieved from LTT if 100% of the chargeable consideration in the land transaction is attributable to qualifying land and the effective date of the transaction is within the relief period. 

(Paragraph 7, Schedule 21A) 

Partial relief will be given from LTT if less than 100% but at least 10% of the chargeable consideration for a land transaction is attributable to qualifying land and the effective date of the transaction is within the relief period. 

The LTT chargeable will be reduced by the proportion equivalent to the relevant proportion. “The relevant proportion” is the proportion of chargeable consideration that is attributable to qualifying land. 

(Paragraph 8, Schedule 21A) 

Consideration attributable to qualifying land must be determined on a just and reasonable basis. 

If less than 100% of the chargeable consideration attributable to transaction land within the special tax site (“the tax site consideration”) is attributable to land that is intended by the buyer to be used exclusively in a qualifying manner, two additional rules must be considered. 

The first applies if at least 90% of the tax site consideration is attributable to land which the buyer intends will be used exclusively in a qualifying manner. If this rule applies, then for the purpose of this relief all of the tax site consideration will be treated as being attributable to qualifying land. 

The second applies if less than 10% of the tax site consideration is attributable to land which the buyer intends will be used exclusively in a qualifying manner. If this rule applies, then for the purpose of this relief none of the tax site consideration will be treated as being attributable to qualifying land.

(Paragraph 10, Schedule 21A) 

Relief is withdrawn if, during the control period, the qualifying land is not used exclusively in a qualifying manner. 

Where relief is withdrawn, a further return must be made within 30 days of the date when the qualifying use ended. The tax due must also be paid by this date. 

The tax due when the relief is withdrawn will be the full amount of the relief originally claimed. 

Relief is not withdrawn where there is an unforeseen change of circumstances that is beyond the buyer’s control and as a result it is not reasonable to expect the qualifying land to be used exclusively in a qualifying manner at that time. 

If reasonable steps are being taken during the control period to ensure that land will be used in a qualifying manner, land or part of the land which is not yet being used in a qualifying manner will not cause relief to be withdrawn. 

Where during the control period qualifying land has ceased to be used in a qualifying manner, that land will continue to be treated as being used in a qualifying manner if reasonable steps are taken to 

• ensure that it is used in that manner, or 
• dispose of all chargeable interests held by the buyer and connected persons in that land, or part of the land, that is no longer used

(Paragraph 11, Schedule 21A) 

The control period begins on the effective date of the transaction for which special tax site relief is claimed. 

The control period for that transaction will end either: 

• after the period of 3 years beginning with the effective date of the transaction 
• or, on the effective date of the final transaction if this occurs before the end of the 3 year period 

A land transaction is the final transaction if immediately after the effective date of the transaction, neither the buyer nor a connected person holds a chargeable interest in the qualifying land. This can occur as a result of a either a single transaction in which the chargeable interest is sold or a number of transactions. 

The buyer, or a connected person, is treated as having no chargeable interest in the qualifying land if the market value of any retained chargeable interest is less than £40,000 following a transaction in which a chargeable interest, or part of a chargeable interest, is sold. If both the buyer and connected person(s) hold more than one chargeable interest, the total market value of all those interests together must be less than £40,000 for this rule to apply.

(Paragraph 12, Schedule 21A) 

Where the buyer disposes of a chargeable interest in part of the qualifying land, the withdrawal of relief and control period will only apply to the part of the qualifying land still held by the buyer.

Relief applies to rents in the same manner as any other form of consideration. 

Rent will qualify for relief as long as the effective date of the transaction is on or before the end of the relief period for the special tax site and at a time that the transaction land is qualifying land. 

Further information is provided in LTTA/4100 on the effect of the first assignment of the lease that is not subject to a claim to special tax site relief or another appropriate relief. 

(Paragraph 9, Schedule 21A) 

Where a transaction occurs, as a result of a completion by a transfer after the relief period, this transaction may not cause tax to be chargeable if the contract was previously substantially performed during the relief period and the transaction was relieved. 

This will happen if the sole reason that the tax would have been chargeable is that  completion of the transaction occurred after the end of the relief period. If there are other reasons that cause tax to be chargeable then the full amount of LTT will be chargeable on the completion transaction. 

(Paragraph 13, Schedule 21A) 

Paragraph 13 is a provision to support alternative property finance arrangements and the existing reliefs where land is sold to a financial institution and leased to a person or where land is sold to a financial institution and re-sold to a person. Guidance on the alternative property finance reliefs is available from LTTA/7017 onwards. 

Where either of these alternative property finance reliefs apply, eligibility for relief, and withdrawal of relief, will be determined by the circumstances of the “relevant person”. The “relevant person” is the person other than the “financial institution” in the alternative property finance arrangement. 

If the “relevant person” meets the conditions for special tax site relief, the “first transaction” (the purchase of the land by the “financial institution”) will qualify for relief. 

Where relief is withdrawn the liability for any additional tax chargeable on the “first transaction” remains with the “financial institution”.