The Scottish commercial property sector could soon be swamped by a surge in deals ahead of the introduction of a new tax next year.

With Stamp Duty Land Tax (SDLT) being replaced by Land and Buildings Transaction Tax (LBTT) in April 2015, legal experts at HBJ Gateley say the introduction of new rates could lead to an increase in transactions in the next few months.

LBTT is a progressive tax, which means that each tax rate applies only to the portion of the purchase price within the relevant rate band similar to the income tax system. This is in contrast to the current SDLT “slab” structure where the highest tax rate is chargeable on the whole price.

The proposed new rates for both residential and commercial properties were published earlier this month. For commercial properties, the LBTT cost will be greater than the equivalent SDLT cost on transactions over £1.95 million.

Caroline James, real estate partner at HBJ Gateley, said: “The new land tax will be good for some while adding an extra burden for others.

“We expect the prospect of increased costs to focus minds and in the coming months there is likely to be a surge in companies looking to close deals before the April deadline.

“But with just six months to go companies will need to move fast if they want to complete deals within the time frame.

“There is still a window of opportunity to complete sales under the existing system but any deal still underway which has not planned to take the new rules into account could find themselves being caught out by unexpected costs.”

Despite the proposed rates being announced, uncertainty remains on some of the reliefs available on LBTT. For example, the Scottish Government recently consulted on a targeted form of “sub-sale” relief – a relief currently available for SDLT, and one very important for investors and developers. Although the proposed relief is welcome (as it was originally omitted from the LBTT regime due to concerns around tax avoidance) there remains concern over differences as to how it will operate compared to the equivalent SDLT relief.

Residential portfolio purchasers will be interested in the outcome of another recent consultation on multiple dwellings relief. This relief operates by allowing LBTT to be calculated on a portfolio purchase by reference to the average price of residential properties rather than by applying the potentially higher rates which would apply to the total purchase price. The current proposed relief is however subject to a minimum rate of 40 per cent of the tax which would have been due without the relief. This may result in higher charges than under the SDLT regime.

Caroline James added: “Although we now know the likely rates for LBTT we are still in the dark about some of the detail.

“With the new rules intended to switch the focus of tax dues on those most able to pay, we still need further information on tax relief.

“With increased signs of commercial property transactions in the Scottish market the Government will need to tread a fine line if it’s to strike the right balance for longer term recovery.”