This section of guidance explains what the chargeable consideration is, and special rules which apply to its determination. Separate guidance is available in relation to determining the chargeable consideration for land transactions involving leases – see LBTT6003.
For guidance on what items are not included in chargeable consideration see LBTT2009.
The chargeable consideration of a land transaction for the purposes of LBTT comprises anything given in money or money’s worth for the subject-matter of the transaction, directly or indirectly by the buyer or a connected party.
In a standard house purchase the chargeable consideration notified to us will be the same consideration recorded on the disposition and in the application for registration sent to the Registers of Scotland.
The amount of the chargeable consideration includes anything paid for assets that form part of the land or property such as houses, farm buildings, fixtures and fittings (including bathroom and kitchen fittings but not moveable assets such as freestanding furniture, carpets or curtains).
For the avoidance of doubt, trees growing in the soil (including any fruit growing on them) constitute part of the land, and therefore part of the chargeable consideration, but the normal annual crops of an arable farm, felled timber and plants or trees growing in free-standing pots do not.
Where you are entering into a land transaction and any part of the LBTT is due to be paid by someone else, it is your responsibility to make sure you understand what LBTT you are liable to pay. Understanding what is your responsibility also applies when you are given a grant or other assistance to purchase a property which covers any part of the purchase price.
LBTT is due on the total chargeable consideration of a land transaction and the buyer is ultimately responsible to pay this amount. It is recommended that you review the terms and conditions of any grant or assistance scheme to check what you are liable to pay.
Value added tax and chargeable consideration
The chargeable consideration for a transaction includes any Value Added Tax (VAT) chargeable in respect of the transaction. But where the seller has the option to charge VAT but has not actually made an election to do so by the effective date of the transaction, then any VAT that subsequently becomes payable does not count as chargeable consideration.
Where some or all of the consideration is to be paid at a later date, it is the amount agreed that comprises chargeable consideration, and no discount is available for the delay in payment.
Just and reasonable apportionment
In some circumstances the total consideration will have to be apportioned on a just and reasonable basis in order to determine the chargeable consideration for a land transaction.
These circumstances include consideration which is attributable:
- to two or more land transactions;
- in part to a land transaction and in part to another matter; or
- in part to matters making it chargeable consideration and in part to other matters.
For the purposes of this rule, any consideration given for what is in substance one bargain is to be treated as attributable to all the elements of the bargain, even though:
- separate consideration is, or purports to be, given for different elements of the bargain; or
- there are, or purport to be, separate transactions in respect of different elements of the bargain.
Valuation of non-monetary consideration
As a general rule, unless expressly provided otherwise, any non-monetary chargeable consideration or consideration which is debt as defined in LBTT2003 should be valued at its market value at the effective date of the transaction (see LBTT2016).
Conversion of amounts in foreign currency
In most transactions money is paid by the buyer, or someone connected to the buyer, in exchange for either ownership of land or for some other interest in relation to land. Where the consideration is in a currency other than sterling, the chargeable consideration is calculated by translating the foreign currency into sterling using the London closing exchange rate on the effective date of the transaction.
Provision of services
Where the whole or part of the consideration for a land transaction consists of the provision of services (other than the carrying out of works to which LBTT2004 applies), the value of that consideration is to be taken to be the amount that would have to be paid in the open market to obtain those services. This rule is subject to arrangements involving certain public or education bodies – see LBTT2015.
Land transaction entered into by reason of employment
Where the seller in a land transaction is the employer of the buyer (or the employer of a person connected with the buyer), and the land transaction is entered into by reason of that employment, the chargeable consideration cannot be less than the market value (see LBTT2016) of the subject-matter of the transaction on the effective date of the transaction.
Other chargeable consideration rules involving exchanges, debt, the carrying out of works, annuities and linked transactions
In addition to the above rules which determine the chargeable consideration, further guidance on determining the chargeable consideration is also available in relation to:
- Exchanges of interests in land – LBTT5002
- Debt as consideration - LBTT2003
- Carrying out of works - LBTT2004
- Contingent, uncertain or unascertained consideration - LBTT2005
- Annuities - LBTT2006
- Deemed market value where transaction involves connected company - LBTT2007
- Linked transactions – LBTT2008