Welsh Land Transaction Tax: what you need to know

From 1 April 2018, Stamp Duty Land Tax (SDLT) has been replaced for transactions relating to properties in Wales with Land Transaction Tax (LTT).  LTT has been introduced pursuant to the Land Transaction Tax and Anti-avoidance of Devolved Taxes Act 2017.

LTT is chargeable on land transactions, defined as “acquisitions of chargeable interests”.

Chargeable interests are defined as either of the following (other than an exempt interest):

• An estate, interest, right or power in or over land in Wales.
• The benefit of an obligation, restriction or condition affecting the value of any such estate, interest, right or power.

Exempt interests are defined as the following:

• Security interests (charges or mortgages).
• Licences to use or occupy land.
• Tenancies at will.
• Franchises (for example, a grant from the Crown to hold a market or fair) or manors.
• Interests in land that fall below the mean low water mark (except for jetties, piers and similar structures if they are attached to land in Wales).

Leases

 The following lease transactions involve the acquisition of a chargeable interest:

• The grant of a lease.
• The surrender of a lease.
• The assignment of a lease.
• Certain variations of leases.
• The holding over or renewal of a lease (or both) in certain circumstances.

Separate calculations are required for rent consideration and non-rent consideration aspects of chargeable interests involving leases.  LTT is not chargeable on the rent payable under a lease that is assigned unless the assigned lease benefited from a specified relief on grant.

Options and pre-emption rights

Unlike under the SDLT regime, the following are land transactions in their own right under LTT, separate from any land transactions that result from their exercise:

• The interest acquired upon the grant of an option to enter into a land transaction.
• The interest acquired upon the grant of a pre-emption right relating to land.

Options or pre-emption rights that constitute or form part of another land transaction – such as options contained in leases are not separately chargeable to LTT.

Cross-border arrangements 

An acquisition of land that is partly in Wales and partly in England is treated as two separate land transactions:

• One for the land in Wales, to which LTT would apply.
• The other for the land in England, to which SDLT rules would apply.
  
  

Rates of LTT

Similar to the SDLT regime, LTT rates apply on a progressive (or slice) basis, i.e., only the chargeable consideration falling within a particular band is subject to the applicable rate of LTT for that band.  The following rates apply:

 
1) Freehold acquisitions and premiums for transactions involving leases:

Non-residential and mixed-use

Residential (first property) 

Supplemental 3% charge for acquisitions of additional residential property

 
*except for properties where the chargeable consideration is less than £40,000

 
2) Lease Rents

LTT is chargeable on rent payable for the grant of non-residential leases and on the grant of certain mixed-use leases. It is not chargeable on rent payable on the grant of residential leases. 

 
Calculation of LTT

The Welsh Revenue Authority has provided an online calculator to help with the calculation of LTT which can be accessed at https://lttcalculator.wra.gov.wales.

The above summary is intended as an overview only and is not to be relied upon in relation to a particular transaction.  For transaction specific advice, please contact Rachel Krol.