Effective Date
The definition of the effective date is not necessarily straightforward. In terms of section 63 of the Land and Buildings Transaction Tax (Scotland) 2013, the effective date of a land transaction can be:
- The date of completion
- Substantial performance of the contract without settlement
- Substantial performance of the contract requiring conveyance to a third party
- In the case of an option, or a right of pre-emption, when the right is acquired rather (rather than when it becomes exercisable)
- When the agreement for a lease is substantially performed
- Any such alternative date as the Scottish Ministers may prescribe by regulations
Leases
The effective date in relation to a lease depends on whether there are missives for let or an agreement for a lease which have been substantially performed before the formal lease is granted. If there are no missives for let or agreement for lease, the effective date is the date when the lease is executed by the parties or constituted in any other way (see above).
Revenue Scotland’s guidance states that “the date of grant of a formal lease in Scotland (i.e. the effective date of the lease) is the date of last execution of the lease”. The usual practice is for both parties to sign the same engrossed document (a legal document which is in its final form). Accordingly, unless the parties meet to sign the document (which is very unusual), one party inevitably signs later than the other. Note also that, as a result, Scottish leases commonly bear two dates, being the actual dates of execution by the parties.
The date of grant of a lease constituted by missives of let (which are not to be followed by a formal lease) is the date of conclusion of missives.
Where the formal lease is preceded by missives of let or an agreement for lease, substantial performance of the missives of let or agreement for lease is the effective date. Substantial performance is constituted by the tenant taking possession of the subjects of the lease or making the first payment of rent or the premium. The same applies to missives for a variation or extension to the term of the lease, although it should be borne in mind that substantial performance does not take place until the expiry of the existing lease.
In short, the date of entry does not necessarily take precedence over the date of execution of the lease and is only likely to be of relevance in cases of substantial performance.