Revenue Scotland will be upgrading the online tax collection system, known as SETS (Scottish Electronic Tax System) in July. This will affect the submission of Land and Buildings Transaction Tax (LBTT) returns. Read on on to find out how to prepare and manage the maintenance and upgrade process from our Tax Law Sub-Committee convener, Isobel d'Inverno and Property Law Convener, Deborah Lovell.
There will be a period of downtime to allow Revenue Scotland to migrate data from the old system and conduct testing on the new one. They expect to switch off the old system at 4pm on Thursday 18 July and the new system is planned to go live at 12 noon on Wednesday 24 July.
Draft returns in process
All the data in the current system, both submitted and draft returns, is expected to be automatically transferred over to the new system. Notwithstanding this, agents may wish to keep a hard copy of the draft return in advance of the downtime.
Submission of returns during downtime
Where possible, we suggest that you submit any returns in advance of the downtime period, taking advantage of the ability to submit returns in advance of the effective date even where the effective date is not yet known.
During the downtime, a paper return can be submitted. Members should note that changes will be made to the existing paper returns from Friday 19 July. The updated returns will be shared via Revenue Scotland’s website on or before 18 July. Revenue Scotland have confirmed that the existing form of paper return will be accepted during the downtime and for a period of 30 days from 18 July. The existing returns can be found on the Revenue Scotland website here. Although the instructions for the paper returns say to complete these in black ink these can be typed for signature on a hard copy.
The paper returns can be used for all transaction types including three yearly lease reviews, lease terminations and assignations. Remember that an additional and separate return must be completed when there is any element of Additional Dwelling Supplement (ADS). It will however not be possible to process ADS reclaims during the down time.
From 19 July, all paper returns for LBTT must be submitted to Revenue Scotland instead of Registers of Scotland. We understand that there will be a 30-day transition period (up to 16 August) whereby any returns sent to Registers of Scotland will be forwarded to Revenue Scotland directly; following that period, returns incorrectly sent to Registers of Scotland will be returned to the submitting party.
All paper returns should be accompanied by cheque payment of any tax due. Cheques should be made payable to Revenue Scotland.
It is important to ensure that the appropriate Local Authority code is entered on the return as this is a required field. A list of the codes can be found on the Revenue Scotland website here.
The return and accompanying cheque can be posted or hand-delivered to Revenue Scotland at Victoria Quay. It is not possible to email a scan of the paper return to Revenue Scotland.
Revenue Scotland processing
During the downtime, on receipt of a paper return and accompanying cheque , Revenue Scotland will date-stamp the return (to protect against late filing penalties) but will not be able to process the return on their system or carry out a full verification check until such time as the new system is up and running. Agents will continue to be issued with an acknowledgement by post. Agents should consider the wording in contracts and undertakings carefully, bearing in mind that if a paper return is submitted to Revenue Scotland during the downtime, no immediate acknowledgement of the return from Revenue Scotland will be available.
The taxpayer may sign the form or agents may sign the paper return on behalf of clients. Agents should obtain client authority to sign and submit in the usual way but, for the avoidance of any doubt, no Revenue Scotland Agent Authorisation form will be required from the client for the agent to sign and submit the paper LBTT return to Revenue Scotland.
A paper return must be submitted with a cheque for payment of any tax due, made payable to Revenue Scotland. BACS is not available for paper returns. Revenue Scotland have advised that no reference needs to be added to the cheque to identify the return to which the payment relates.
Registration of title
Registers of Scotland will accept applications for registration during the downtime and are expected to complete their initial checks on title as normal.
The legal examination process will pause at the stage of checking that a return has been made and if applicable, tax paid (known as a section 43 check). The application will be held until the new SETS is available and the checks can be carried out. The submitting agent will receive the application and registration date as normal. If a paper return plus a cheque have been received by Revenue Scotland, Registers of Scotland will not reject the registration application.
It is understood that Revenue Scotland will arrange to provide Registers of Scotland with confirmation of receipt of returns as soon as possible after receipt although this is unlikely to be until after the system is back online. It is not possible for Revenue Scotland to confirm how long this will take and agents should therefore be aware of the need to consider renewal of Advance Notices where these may expire shortly after submission of the paper return.