Capital Gains and other taxes manual

Section 13

The Valuation Office Agency's (VOA) technical manual used to assess Capital Gains and other taxes.

Part 1: the legislation

13.1 Background

The Scotland Act 2012 devolved powers to the Scottish Parliament including control of taxes on property transactions and disposals to landfill. The Scottish replacement for Stamp Duty Land Tax (SDLT) is the Land and Buildings Transaction Tax (LBTT). The legislation introducing LBTT is contained in the Land and Buildings Transaction Tax (Scotland) Act 2013 (LBTT(S)A 2013). The new tax replaces SDLT in Scotland with effect from 1 April 2015. LBTT is a self assessed tax that is administered by a new Scottish Government department, Revenue Scotland.

Further details can be found in the Revenue Scotland Technical Guidance at

[‘LBTT Legislation Guidance Revenue Scotland’](

13.2 The tax payable

LBTT is a charge on land transactions in Scotland. Land transactions include the purchase of a chargeable interest in residential and non-residential properties and the grant of a new lease in non-residential properties. A land transaction must be notified to Revenue Scotland unless it falls within one of the exempt categories in Schedule 1 of the LBTT(S)A 2013.

LBTT is payable on the ‘chargeable consideration’ which is normally the price paid for the property by the purchaser. LBTT does not apply if the property is transferred as a gift and there is no chargeable consideration. The proposed tax rates and bands are as follows:

Residential property transactions

Purchase price

LBTT rate

Up to £145,000


Above £145,000 to £250,000


Above £250,000 to £325,000


Above £325,000 to £750,000


Over £750,000


Residential property transactions

Purchase price

LBTT rate

Up to £150,000


Above £150,000 to £350,000


Above £350,000


If the chargeable consideration is above the payment threshold, LBTT is charged at the appropriate rate on the amount within that band. For example, an office bought for £465,000 is charged at:

  • 0% for the first £150,000

  • 3% for the next £200,000 and

  • then 4.5% for the remaining £115,000

  • so £11,175 must be paid in LBTT

On the grant of a chargeable lease LBTT is also charged at 1% on the portion of the ‘Net Present Value’ (NPV) above £150,000. LBTT(S)A 2013, schedule 19, paragraph 6 provides for the NPV calculation.

Further information about LBTT can be found on Revenue Scotland’s website at

[‘LBTT Legislation Guidance Revenue Scotland’.](

13.3 Market value

As indicated in paragraph 13.2 above, LBTT is normally based on the price paid for the property by the purchaser. However, in some instances such as transactions involving certain connected companies (s.22-23, LBTT(S)A 2013) and exchanges (LBTT(S)A 2013, schedule 2, paragraph 5(4)) the charge may be based on the ‘market value’ of the property.

Section 62, LBTT(S)A 2013 provides that ‘market value’ is “to be determined as for the purposes of the Taxation of Chargeable Gains Act 1992 (c.12) (see sections 272 to 274 of that Act).” Further guidance on the meaning of market value under the Taxation of Chargeable Gains Act 1992 can be found in Section 7 of this Manual.

13.4 Basis of valuation

In some cases, such as when a property is sold together with other assets which are not liable to LBTT it may be necessary to apportion the price paid by the purchaser between the property and the other non-chargeable assets. LBTT(S)A 2013, schedule 2, paragraph 4(1) provides that any apportionment should be on a ‘just and reasonable’ basis. The LBTT(S)A 2013 does not define the method of arriving at a ‘just and reasonable’ as this will depend on the circumstances of the case. However, any apportionment should generally seek to apportion the price paid between the underlying assets included in the sale on the basis of their relative values and the contribution they make to the price that is being apportioned.

Difficulties may arise in cases where it is necessary to apportion the price paid for a business as a going concern and the property is a trade related property. Guidance on the approach to be adopted when carrying out an apportionment in such cases for the purposes of SDLT, and the assumptions to be adopted when valuing the tangible assets, is set out in a Practice Note which can be found on HMRC’s pages on Any apportionments required for the purposes of LBTT should be carried out using the same approach. Caseworkers should liaise closely with the nominated LPVU goodwill adviser in all cases involving such apportionments.

13.5-13.9 Reserved

Part 2 – Case procedures

13.10 Reference of cases

When Revenue Scotland require advice on the market value of a property, or the sum to be apportioned to a property when it has been sold with other assets, they will forward their request for advice by e-mail to the VOA’s ‘SVT Hub’. The request will be headed ‘Land and Buildings Transaction Tax’ (client account number x) and will include the following information:-

  • The name and address of the taxpayer

  • The address of the property acquired

  • The total price paid by the taxpayer

  • The interest acquired by the taxpayer

  • The taxpayer’s valuation or apportionment

  • The advice required – not negotiated or negotiated

  • In negotiation cases, the name and address of the taxpayer’s agent

  • A copy of any valuation report or other information provided by the taxpayer in support of their valuation or apportionment

  • In cases where an apportionment involving a trade related property is required – a copy of the transfer documents and copies of the last three years trading accounts for the business

A separate request will be sent for each separate valuation or apportionment required.

13.11 Registration of cases

All LBTT cases should be entered on the CRAC system using case type 298.

All first reference cases should initially be registered on CRAC as credit type 01 (not negotiated case). If a negotiated valuation or apportionment has been requested the caseworker will need to amended to credit type 02 (negotiation case) when it has been decided that negotiations are necessary. If a case is reported then later referred back for negotiations (or further negotiations) it should be registered as credit type 03 (referred back case).

All LBTT cases should be entered on the EDRM system and processed in accordance with EDRM guidance. On registration the following documents will be placed on every file:

  1. The Revenue Scotland instruction with attachments
  2. A valuation template
  3. A case reporting template
  4. A History Working Sheet
  5. A digital map

The case will be allocated to the appropriate caseworker indicated on the SVT Scotland case allocation sheet. The nominated LPVU goodwill adviser should be made a contributor in every case.

  1. There is insufficient information to identify the property Revenue Scotland should be advised as soon as possible and no further action should be taken on the request until further information or clarification is received.

13.12 Acknowledgement

All requests for advice should be acknowledged by SVT Hub within 3 working days when the case is allocated to a caseworker. The acknowledgement should include the name of the VOA caseworker, their location, email address and telephone number.

13.13 Not negotiated valuations

If no further essential information is required, the caseworker should decide on the basis of the information provided by the taxpayer, together with any knowledge of the property and office records, whether or not the proposed valuation or apportionment may be accepted. No inspection should be made.

If the taxpayer’s valuation or apportionment can be accepted Revenue Scotland should be advised accordingly and the report endorsed ‘as returned’.

If the taxpayer’s valuation or apportionment cannot be accepted then the caseworker should report accordingly and notify Revenue Scotland of the valuation or apportionment that is considered to be appropriate. The report should be endorsed as ‘not negotiated’ and also explain the reasons why the valuation submitted by the taxpayer cannot be accepted. The report should also clearly state that the opinion is based on the information provided and include any assumptions that have been made.

The report should normally be sent to Revenue Scotland by gsi e-mail within an average of 20 working days of receipt of the case.

13.14 The interest to be valued

Revenue Scotland may request that a valuation or apportionment is negotiated with the taxpayer either from the outset, on first reference to the VOA or following an earlier not negotiated report in accordance with paragraph 13.13 above.

If the caseworker is able to accept the valuation or apportionment put forward by the taxpayer either on the basis of the available information, or after obtaining further information from the taxpayer the case should be reported ‘as returned’ to Revenue Scotland within either 30 working days of receipt of the case or receipt of any further information requested. If the case is reported on the basis of the information included in the request the credit type will be 01, if it is necessary to obtain further information from the taxpayer then the credit type will be 02 or 03.

If, after obtaining any further information from the taxpayer, the caseworker is unable to accept the valuation or apportionment put forward by the taxpayer then the property should be inspected internally. If it is necessary to inspect the property in a first reference case then, if it has not been done already, the case credit type should be amended from 01 to 02. If after inspection the caseworker is still unable to accept the taxpayer’s valuation or apportionment then the case should be progressed in accordance with paragraph 13.15 below.

13.15 Contact with taxpayer or agent

A letter should be sent to the taxpayer, or agent, advising that the case has been received and the name of the caseworker to whom it has been allocated in all cases not reported within 30 working days of receipt of the case. In cases where further information is required this opening letter should include the request for any information required.

Where, following inspection, the caseworker is unable to accept the value returned the taxpayer should be advised of the caseworker’s opinion of value either within 30 working days of receipt of the case or 20 working days of the receipt of any further information or inspection. If no response is received from the taxpayer or agent reminders should be issued to the taxpayer/agent at 20 working day intervals.

Every effort should be made to conclude negotiations and report the case as soon as possible, the aim being to report all cases within an average of 120 working days.

If negotiations reach deadlock or the other side are not responding then an ‘unagreed’ report should be issued as soon as possible in accordance with the procedures in Part 3 below and the case file closed. The case may be re-opened if it is referred back for further negotiations after have contacted the taxpayer.

13.16 Progress reports to revenue Scotland

Caseworkers should maintain regular contact with the Revenue Scotland caseworker during the life of a case, particularly if any difficulties are encountered in progressing the case.

In negotiation cases the caseworker should normally issue a short progress report to Revenue Scotland at 40 and 80 working days from receipt of the case. Detailed progress reports should be issued in all cases not reported after 120 working days, detailing the state of the negotiations and the values contended for by the VOA and the parties, and at two monthly intervals thereafter until the case is reported.

13.17 Further information required

On receipt of the case, the caseworker should as soon as possible consider whether there is sufficient information available to provide advice on the relevant valuation or apportionment or whether further essential information is required.

a. Not negotiated cases

Where information is lacking the caseworker should, whenever possible, make any assumptions that seem reasonable and unlikely to give rise to substantial error in valuation. There should be no direct contact with the taxpayer or their agent. Where the information provided is insufficient to make a judgement on the valuation then the caseworker should notify revenue Scotland within 20 working days of receipt of the case, specifying the information required and requesting Revenue Scotland to obtain it from the taxpayer. The case should be reported on CRAC within 20 working days of receipt and no further action taken until the information is received.

If the information is received from the taxpayer Revenue Scotland will forward the information provided to the VOA. On receipt of the information a new case (credit type 01) should be opened and the valuation should be considered in accordance with the procedures below. Part.

b. Negotiation cases

Where information is lacking the caseworker should seek to obtain any further information from the taxpayer, or their agent, within 20 working days of receipt of the case. The request for information should include a date by which it is required (usually 20 working days) and also advise the taxpayer, or agent to make contact if they are unable to meet this date. It is important for caseworkers to carefully consider the further information needed to ensure that they do not request information that has already been provided.

If no reply is received to the request for information a reminder should be issued after 20 working days. The reminder should set out the information required again and advise the taxpayer that if it is not received within 20 working days the matter will be referred to the Revenue Scotland to consider seeking the outstanding information formally. If a substantive reply, or a refusal to supply the information, has not been received after a further 15 working days then the caseworker should telephone to seek an explanation for the delay. If the information is still not received by either 20 working days from the issue of the written reminder (i.e. up to 60 working days from receipt of the case), or by the revised date agreed in the telephone call, the Revenue Scotland caseworker should be notified so that they may consider using Revenue Scotland’s information powers to obtain the outstanding information. Pending receipt of the required information, the file should be reported and the taxpayer or agent should be notified of the request to Revenue Scotland to obtain the information.

When the required information is received the case should be reopened (credit type 03) and the caseworker should then proceed with the valuation and any negotiations required. If the information is received by the VOA direct from the taxpayer, or agent, after Revenue Scotland has been asked to consider a formal request the caseworker should immediately notify the Revenue Scotland caseworker, so that any formal action may be halted. The caseworker should then arrange for the case to be reopened (credit type 03) and proceed with the valuation and any negotiations required.

13.18 Inspections

a. Statutory powers

Section 145 of the Revenue Scotland and Tax Powers Act 2014 provides that a ‘designated officer’ may enter and inspect premises for the purpose of valuing, measuring or determining the character of the premises or property if the valuation, measurement or determination is reasonably required for the purpose of checking any person’s tax position. ‘Designated officer’ means a member of staff of Revenue Scotland or other person who is, or a category of members of staff or other persons who are, designated by Revenue Scotland. It is intended that Valuation Office Agency staff working on Revenue Scotland cases will be made designated officers for this purpose. A person who the officer considers is needed to assist with the valuation, measurement or determination may enter and inspect the premises or property with the officer. This statutory inspection power is subject to conditions contained in s.146 of the Act. An inspection using the statutory power contained in s.145 may be carried out only if either Condition A or Condition B is satisfied. Condition A provides that the inspection is carried out at a time agreed to by the relevant person, and that the relevant person has been given notice in writing of the agreed time of the inspection. Condition B provides that the inspection has been approved by the tribunal, and any relevant person specified by the tribunal has been given at least 7 days’ notice in writing of the time of the inspection.

In most cases it will usually be possible to arrange an inspection for valuation purposes with the taxpayer (or the current owner or occupier of a property) by agreement without resorting to formal use of the statutory powers. When arranging inspections by agreement caseworkers should always follow the advice contained in the following paragraphs and if in any case inspection is refused or frustrated caseworkers must refer details of the difficulty to Revenue Scotland in accordance with sub-paragraph (c) below. If necessary, VOA staff working on Revenue Scotland cases will be made designated officers for this purpose.

b. Conduct of inspection

Caseworkers should always give prior notice of a proposed inspection and, if possible, confirm any verbal arrangements in writing before an inspection is undertaken. For tax confidentiality reasons the particular purpose of the inspection must not be disclosed to anyone other than the taxpayer or their agents. If some limited disclosure to anyone else is considered necessary the use of the phrase “for tax purposes” is appropriate. If a caseworker is confronted with a situation where only a minor (child) is present on the premises, under no circumstances should any inspection of the property be made either internally or externally. This also extends to the taking of, or checking of external dimensions. On returning to the office, the caseworker should send a letter to the occupier explaining the circumstances and, an appointment should be made with a request that an adult will be present on the next occasion. In all cases the caseworker should produce an authority to inspect.

c. Inspection refused

If after attempting to arrange an inspection by agreement facilities to inspect are refused or frustrated the facts should be reported to the Revenue Scotland caseworker within 5 working days of the refusal or the second failed appointment. The report to Revenue Scotland should give an estimate of the valuation required, based on an inspection without entry on to the property. Revenue Scotland will then consider using the statutory powers whilst being accompanied by the VOA caseworker.

13.19 Reporting the case

Cases should be reported to Revenue Scotland endorsed either ‘as returned’, ‘not negotiated’, ‘agreed’ or ‘unagreed’ (see Part 3 below) as appropriate. All reports should be sent to the Revenue Scotland caseworker by gsi e-mail.

As soon as the report has been issued the caseworker should:-

  • Review the TRACS information, amend if necessary, confirm accuracy and ‘sign’. (If an amendment is required to the fee recorded in TRACS this should be recorded using the template in EDRM.)

  • Complete the CWS reporting form in EDRM.

  • Inform local Caseworker Support that the case is now ready to close using EDRM quick flow alert.

Local Caseworker Support will access TRACS, ‘authorise’ the Case Diary Sheet (CDS), produce it in PDF form and drag and drop it into the EDRM file.

All the above activities are classed as non-chargeable time and should be recorded under ‘case registration and reporting’ on the TRACS barcodes sheet.

13.20 Time limits

LBTT cases are subject to the following timeliness targets:

  1. For all credit type 01 cases the target is to report all cases within an average of 20 working days.
  2. For all credit type 02 or 03 cases the target is to report all cases as soon as possible and within an average of 120 working days.

13.21 Quality Assurance and Quality Control

1.cases are subject to the same QA and QC procedures applicable to HMRC casework.

13.22 Data security relating to LBTT cases should be handled in accordance with the VOA’s data handling guidance.

13.23 Advice on questions of principle and law

If, at any stage in a case, caseworkers need advice on questions of principle or legal interpretation they should consult the SVT Policy and Professional team.

13.24-13.29 Reserved

Part 3 – Unagreed/defendable on appeal procedures

13.30 Unagreed valuations

If it is not possible to reach agreement with the taxpayer on the appropriate valuation or apportionment then an ‘unagreed’ report should be issued to Revenue Scotland.

Issuing an ‘unagreed report’ is the first step in a series of procedures which may culminate in a Tribunal hearing. Consequently, before reporting an ‘unagreed’ valuation, the case must be thoroughly reviewed to ensure that any assumptions made are confirmed by the facts, that the supporting evidence is relevant and the valuation is prima facie defendable.

13.31 Review of case

As soon as it becomes clear that agreement is not possible consideration should be given to reporting ‘unagreed’. An unagreed report should only be issued when negotiations have genuinely reached deadlock or if the other side is not responding

Before reporting an unagreed valuation to Revenue Scotland the case should be thoroughly reviewed by the sector leader to ensure that:-

  1. There is no prospect of agreement, negotiations have been exhausted and all correspondence has been answered.
  2. That an internal inspection has been undertaken of the subject property together with external inspections of all comparables.
  3. The approach to the valuation is correct in principle and law.
  4. Subject to any disclosure consents being forthcoming, the available evidence adequately supports the opinion of value and any known evidence which could discredit the valuation is sufficiently outweighed by favourable evidence.
  5. If the valuation is largely or wholly unsupported because the evidence is scanty or non-existent the opinion of value is logical and reasonable having regard to all the circumstances.
  6. If factual information is in doubt, or has not been made available, the assumptions behind the valuation are reasonable. If in the event of those assumptions proving to be incorrect there would be a substantial variation in the opinion of value then the report to Revenue Scotland must make those assumptions clear and request Revenue Scotland to advise the taxpayer accordingly.
  7. Consideration should be given to whether the case would benefit from ‘Alternative Dispute Resolution’ (ADR).

13.32 Report to revenue Scotland

The unagreed opinion of value should be issued direct to the Revenue Scotland caseworker endorsed “Unagreed” and the report should state:-

  • The valuation considered to be appropriate
  • The reason why the valuation is unagreed (e.g. whether due to a difference of opinion, information not provided or the parties failure to respond)
  • The taxpayer’s latest valuation
  • Any information still required
  • Any assumptions made
  • Whether it is considered that there is a point of principle in dispute
  • Comments on the strength of the case with, if appropriate, an indication of a range of values (i.e. what is acceptable on the available evidence relative to what is the considered market value)

If the case is considered suitable for ADR, make a reasoned recommendation to this effect.

13.33 Case closure

When cases are reported on an ‘unagreed’ basis the file should be closed by the caseworker on CRAC.

It should be re-opened (credit type 03) when Revenue Scotland either requests the VOA caseworker to attempt further negotiations or sends the VOA a copy of a ‘Tribunal warning letter’ in accordance paragraph 13.35 below.

13.34 Informing the taxpayer

At the same time as the unagreed report is issued to Revenue Scotland a letter should be sent to the taxpayer, or agent, incorporating the following information:-

  1. The taxpayer’s latest valuation
  2. The valuation being reported to Revenue Scotland
  3. A brief note of the basis and any assumptions made

No mention should be made at this stage that the case may become the subject of litigation as this is ultimately a decision to be made by Revenue Scotland.

13.35 Action by Revenue Scotland on receipt of an unagreed report

Following receipt of an ‘unagreed’ report Revenue Scotland will, if they consider appropriate, write to the taxpayer and advise them that unless an agreement is reached it will be necessary to consider a reference to the Tribunal. A copy of this Tribunal warning letter will be sent to the VOA.

13.36 Further negotiations

On receipt of a copy of Revenue Scotland’s Tribunal warning letter the case should be reopened (credit type 03) and the caseworker should write to the taxpayer or agent to enquire whether they wish to discuss the matter further before steps are taken to prepare the case for reference to the Tribunal. In any case where the failure to reach agreement is partly due to an inability to disclose evidence from confidential records the caseworker may also at this stage seek consent to disclose the evidence - See Practice Note 4 and appendices regarding disclosure.

If negotiations are resumed Revenue Scotland should be advised and the caseworker should endeavour to bring the further negotiations to a conclusion as soon as possible. Revenue Scotland should be kept informed of progress throughout any further negotiations at 20 working day intervals.

If agreement can be reached on the appropriate valuation or apportionment the case should be reported accordingly. If the caseworker is not able to reach an agreement Revenue Scotland should be advised and informed of the caseworker’s latest unagreed valuation.

If the taxpayer does not respond to the invitation to negotiate within 8 weeks of Revenue Scotland’s Tribunal warning letter the caseworker should advise Revenue Scotland accordingly. The case should be kept open at this stage but if no further instructions have been received within 60 working days of having been reopened then the case should be closed.

13.37 Request for a DOA report

If, following any further negotiations under paragraph 13.36, the valuation remains unagreed Revenue Scotland will review the case to ensure that a reference to the Tribunal is appropriate and request a Defendable on Appeal Report (DOA Report).

The purpose of the DOA Report is to provide Revenue Scotland’s Solicitor with full details of the valuation dispute and a reasoned statement of the strengths and weaknesses of the case.

The DOA Report should comprise both a VO 1009 Case Summary and a full side-headed Appeal Report (see Appendices 7, 8 and 9, adapted as appropriate).

13.38 Action on receipt of request for a DOA report

On receipt of a request for a DOA Report the VOA caseworker should:-

  1. Prepare a DOA report and attachments in EDRM for approval and signing by the sector leader, who should add their comments, sign electronically and alert the appropriate Technical Adviser, SVT Policy & Professional to it. This should be completed within 20 working days of receipt of Revenue Scotland’s request.

  2. If needed, take steps to obtain consents to the disclosure of any comparables on which the valuation is based using the letters in Appendices 35 & 36 adapted as appropriate, as well as obtaining any other documentary evidence (for example, auction particulars, planning consents or policy documents) required to prove a case before the Tribunal.

The reason for seeking disclosure consents at this stage is to avoid the need to seek an extension of time for filing expert witness reports should the appeal be notified by the taxpayer to the Tribunal with no advance warning having been given to the VOA. The issue of the DOA Report must not, however, be delayed pending receipt of any consents or other documentation.

13.39 Action by Technical Adviser (TA) on receipt of DOA report

The role of the TA is to confirm that, on the information provided, an objective review of the case confirms that prima facie the valuations are supportable and the case should proceed to determination. As part of the review the TA may wish to externally inspect the property or suggest further research before the report is approved and forwarded.

  1. The TA should within 8 weeks of Revenue Scotland’s request:

  2. Forward the DOA Report to the Revenue Scotland caseworker with any comments

Provide the sector leader and VOA caseworker with a copy of the TA’s comments to Revenue Scotland.

13.40 Change case type

When a DOA report has been approved by the SVT Technical Adviser and issued to Revenue Scotland the caseworker should ensure that the case is closed and re-opened as a ‘litigation’ case type 186 with credit type of 02.

13.41 Reference to the tribunal

On receipt of the DOA Report Revenue Scotland will review the case and discuss the way forward with SVT Policy & Professional. If appropriate, they may close the enquiry but before doing so write to the taxpayer to set out the current position and say that the VOA are ready to resume negotiations. They will allow a month for a response and may approach VOA to find out whether there has been any further contact. If meaningful negotiations have not been resumed Revenue Scotland will close the enquiry. This may result in an appeal by the taxpayer who can then notify their appeal to the Tribunal at any time.

Guidance on the procedures in Tribunal cases can be found in Section 6, Part 6 of this Manual.

13.42 Reference to the Tribunal by the taxpayer

If it is discovered that the taxpayer or agent has made a reference to the Tribunal, SVT Policy & Professional should be notified immediately.