Guidance on chargeable consideration for Land Transaction Tax.
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LTTA/2260 Chargeable consideration
(Schedule 4 as introduced by section 18(1) of, the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017).
The chargeable consideration, except as expressly provided for elsewhere is any money or money’s worth given for the subject matter of the transaction. This includes consideration given directly and indirectly by the buyer or persons connected to them.
LTTA/2261 Fixtures and fittings
If an item is annexed to the property, it is subject to LTT, as it is considered a fixture or part of the land.
These items include:
- fitted kitchen units, cupboards and sinks (excluding white goods)
- fitted bathroom sanitary ware
- Agas and wall-mounted ovens
- central heating systems
- intruder alarm systems
- external plants, shrubs or trees
This is not an exhaustive list.
Alternatively, the following items would not normally be considered fixtures, and so would not normally be subject to LTT.
- carpets (fitted or not)
- curtains or blinds
- free-standing furniture
- kitchen white goods (unless fully integrated)
- gas and electric fires (if they can be disconnected from the power supply without damaging the property)
- light fittings
- plants or trees growing in pots
This is not an exhaustive list.
An apportionment must be made on a just and reasonable basis for those items which are not considered to be fixtures or fittings. The apportioned amount may differ from the price agreed between the buyer and seller.
In a commercial situation, any plant or machinery that can be easily removed from the property would not be considered a fixture. Any heavy plant or machinery that is integral to the property would be considered a fixture.
LTTA/2270 Money or money’s worth
Money is easily understood and represents the amount of cash provided as consideration for the transaction, be that by cheque payment, electronic transfer etc. It will include monies provided to the seller and also money provided by the buyer to other persons at the direction of the seller, where that is a condition of entering into the land transaction.
For example, fees for which the seller may be liable but which are to be paid by the buyer as part of the consideration for the subject-matter of the land transaction, are chargeable consideration. Examples of such fees might include the seller’s estate agent, legal, tender, introductory fees or the commission paid to an auction house for the sale of the property. Where such fees are paid by the buyer they, together with any VAT charged on the fees, will be chargeable consideration.
Where fees are paid not at the direction of the seller, or are not conditional upon the transaction occurring then they are not likely to be part of the chargeable consideration. For example, money paid for a finder’s fee is a liability of the buyer not the seller and its payment is therefore not at the direction of the seller. It is the buyer’s liability and the land transaction is highly unlikely to be dependent upon payment of that finder’s fee. Likewise, fees for entry to or registration at an auction that permit the buyer to participate in the auction are unlikely to be part of the chargeable consideration given for the land transaction.
‘Money’s worth’ represents anything given in consideration that is not money but has a value that can be expressed as money. It therefore includes anything that has monetary value that is capable of being realised. It will include, for example, gold, jewellery, art works, cars, stocks and shares, etc.
LTTA/2280 Conversion of amounts of foreign currency
(Schedule 4 paragraph 10)
If the consideration is expressed in another currency, including non-national currencies such as the electronic currency Bitcoin, the amount of consideration is to be ascertained by reference to the closing exchange rate on the effective date of the transaction. If it is necessary to convert the amount first into another currency (say US dollars) and then into sterling then these 2 conversions must be carried out (this may be the case with non-national currencies).
However, if the parties have agreed a rate that differs from the London closing exchange rate, that rate should be used.
LTTA/2290 Valuation of non-monetary consideration
(Schedule 4 paragraph 7)
The chargeable consideration, except as otherwise provided, and which is not money (whether sterling or another currency) or debt, is taken to be its market value at the effective date of the transaction.
LTTA/2300 Market value
For the purposes of the LTTA Act, market value is determined in the same way as it is for the purposes of the Taxation of Chargeable Gains Act 1992. In particular, sections 272 to 274 of that Act. However, certain provisions require VAT to be included as part of the consideration.
LTTA/2310 Value Added Tax (VAT)
(Schedule 4 paragraph 2)
The chargeable consideration for a transaction includes any VAT chargeable in respect of the transaction. However, if an option to tax under Part 1 of Schedule 10 to the Value added Tax Act 1993 was made after the effective date of the transaction, the VAT arising on the consideration given is not chargeable consideration. The potential to elect for the option to tax does not constitute a contingent event.
Such situations may arise where a landlord, after granting a lease, may elect for the option resulting in the tenant needing to pay VAT on the rent.
Where there is a transfer of a going concern and that transfer meets all the relevant VAT conditions, VAT will not be payable. The chargeable consideration will therefore be the VAT exclusive amount.
However, where those VAT conditions are not met and VAT is payable, that amount of VAT paid will be chargeable consideration.
The chargeable consideration must reflect the rate of VAT in force at the effective date of the transaction. If there is a subsequent change in the rate of VAT it will not affect the computation of the chargeable consideration.
Potential future changes to the VAT rate do not constitute a contingent event.
Where a lease has an effective date of the transaction on or after the date that a VAT rate change occurred, the taxpayer must calculate the net present value (‘NPV’) of rent:
- using the ‘old’ VAT rate from the effective date of the transaction to the day preceding the first rent payment date, and
- the ‘new’ VAT rate on the rent payable on or after the first rent payment date
Where the lease has an effective date of the transaction before the date the rate changed, potential future VAT rate changes are not treated as contingent consideration.
However, in the event that the lease has variable or uncertain rents, if the taxpayer is required to make an additional return because a reconsideration date is reached, any VAT changes are to be taken into account. This is so that the annual rent amounts are established using the actual rates of VAT applying up to the reconsideration date. Any VAT rise (or decrease) will also be taken into account in establishing the highest rent paid in any 12 month period for the purposes of calculating the NPV for each year after year 5 of the lease.
If a taxpayer incorrectly did not include VAT within the chargeable consideration and HMRC, in a VAT post-transaction ruling, determine that VAT was chargeable, the taxpayer must amend their LTT return to include the VAT element. If the return cannot be amended because the date for making such an amendment has expired, the taxpayer should write to WRA stating the additional consideration that is now chargeable.
In the event that the taxpayer incorrectly included VAT in their calculation of chargeable consideration and as a result of a HMRC post-transaction ruling there is less chargeable consideration, the taxpayer may amend their return. If this is no longer possible, make a claim to WRA in accordance with section 63 TCMA 2016.
LTTA/2320 Postponed consideration and consideration paid by instalments
(Schedule 4 paragraph 3)
The amount of the chargeable consideration for the land transaction is the full amount of the agreed consideration to be paid at any point in time (as opposed to that paid on completion or on substantial performance of the contract). There is no discount applied to payments due at future dates.
LTTA/2330 Just and reasonable apportionment
(Schedule 4 paragraph 4)
Chargeable consideration is only that consideration given for a land transaction. It is possible that a single deal can include; 2 or more land transactions, in part to a land transaction and in part to another matter, or, in part to matters making the consideration chargeable consideration and in part to other matters.
In such cases, it is necessary for the taxpayer to apportion the consideration given for the single deal between that which relates to land transactions and that which relates to the other matters. The apportionment agreed between the buyer and seller, even where stated in a contract, may not represent a just and reasonable apportionment. It is the facts that establish the just and reasonable apportionment not the form of the contract.
2 common situations where just and reasonable apportionment will be required are where:
- fixtures and fittings are included in the price agreed for the sale of a property (for example curtains, furniture and white goods, potted plants in a residential sale. This does not include items affixed to the property (for example fitted furniture, sinks and baths, central heating systems etc.)), or
- the purchase of a business that includes the land and property, but also goodwill, plant and machinery, stock, etc
Trees and fruit growing on them are part of the land and the consideration given for the land and the trees and crops is the chargeable consideration for the land transaction. Crops that have been harvested, felled trees and plants in pots are not part of the land.
In addition, situations may arise where the land transaction relates to land in both Wales and elsewhere, either as a cross-border or a cross-title transaction, which will require a just and reasonable apportionment to establish the correct chargeable consideration for LTT.
The WRA will adopt the same principles as HMRC in relation to the valuation of goodwill. The WRA accepts that if a business is sold as a going concern, the sale may include some element of goodwill. The question to be answered is not whether goodwill exists, but what is the value of that goodwill. That question has to be decided on the facts of each individual case and will vary depending on the type of property and its use. In some cases the value of the goodwill may be nominal but in others it may be substantial.
Goodwill is the difference between the value of a business as a going concern and the value of the separately identifiable assets included in the sale. The WRA will consider that the value of any goodwill in trade related properties should be arrived at by deducting the value of the separately identifiable assets included in the sale from the value of the business as a going concern. A trade related property is defined in the Royal Institution of Chartered Surveyors Guidance Note 2 (GN2) as “any type of real property designed for a specific type of business where the property value reflects the trading potential for that business”, for example, pubs, hotels, petrol stations, post offices etc.
The value of a business as a going concern will usually be represented by the actual sale price achieved in the open market. However, if the sale was not at arms length it will be necessary to establish that arms length value of the business as a going concern.
(Schedule 4 paragraph 5)
An exchange occurs when one or more land transactions are entered into by a buyer, jointly or solely, in consideration, wholly or partly, for one or more land transactions being entered into by them, jointly or solely, as seller.
There are specific expressions used in the exchange rules:
- ‘relevant transaction’ which means any transaction related to the exchange
- ‘relevant acquisition’ means a relevant transaction entered into as buyer, and
- ‘relevant disposal’ means a relevant transaction entered into as seller
Where the subject-matter is a major interest in land for a single relevant acquisition, the chargeable consideration is:
- the market value of the subject-matter of the acquisition at the effective date of the transaction. Market value excludes VAT
- if the acquisition was the grant of a lease at rent that rent, and
- any value added tax chargeable in respect of that acquisition at the effective date of the transaction
Where the subject-matter includes major interests in land for a number of relevant acquisitions, the chargeable consideration is:
- the market value of the subject-matter of each acquisition at the effective date of the transaction. Market value excludes VAT
- if any of the acquisitions was the grant of a lease at rent that rent, and
- any value added tax chargeable in respect of those acquisitions at the effective date of the transaction
Where the subject-matter of the transactions does not include a major interest in land:
- where there is a single relevant acquisition made in consideration for one or more relevant disposals, the chargeable consideration for the acquisition is any chargeable consideration given other than the relevant disposals – the interests exchanged are disregarded
- where there are 2 or more relevant acquisitions made in consideration of one or more relevant disposals, the chargeable consideration for each acquisition is the ‘appropriate proportion’ of the chargeable consideration given other than for the relevant disposal or disposals
- the ‘appropriate proportion’ is calculated using the formula MV ÷TMV
MV is the market value of the subject-matter of the acquisition for which the chargeable consideration is being determined. Market value excludes VAT
TMV is the market value of the subject-matter of all relevant acquisitions.
When establishing the market value, no account is to be taken of a reduction in what would otherwise be the market value if that reduction is the result of anything done where the main purpose, or one of the main purposes, is to avoid tax, whether by the buyer or another person. The rule prohibits the inclusion of covenants, options to acquire, etc. that can impact the market value on the effective date but will not, or are unlikely to, impact on the enjoyment of the property. The amount of consideration given (perhaps including a cash equity payment) is likely to be indicative of the market value.
For example, a time limited covenant to the effective date may impact on the value of the land on that date. The fact that it is no longer in effect on the following day means that it should not be taken into account in establishing the market value on the effective date of the transaction.
LTTA/2360 Partitions – disregard of existing interest
(Schedule 4 paragraph 6)
Where 2 or more people are jointly entitled to land and there is a partition or division of the land, this is not treated as an exchange. The giving up of a share in one part of the land is not treated as chargeable consideration for the acquisition of a share in another part.
Taxpayers are ‘jointly entitled’ if they are beneficially entitled as joint tenants or tenants in common.
This only applies where the land is in Wales; any share of land in England given in exchange for land in Wales (as part of a partition) is not covered by these rules.
LTTA/2370 Purchase of land with associated works to be carried out
This guidance applies where the seller agrees to sell land to the buyer and the seller also agrees to carry out work, commonly works of construction, improvement or repair, on the land sold.
The chargeable consideration, except as expressly provided for elsewhere is any money or money’s worth given for the subject matter of the transaction.
The WRA will apply the decision in Prudential Assurance Co Ltd v IRC  STC 863 to the identification of the subject-matter of the transaction. The decision is therefore relevant for LTT.
The identification of the subject-matter of the transaction must relate to the commercial substance of the transaction.
The subject-matter of the land transaction will normally be the land in its condition at the date of transfer.
A common example is where land is transferred by the seller to the buyer and, at that date, the work on the land either has not started or is incomplete.
Where the sale of land and the works contract are effectively one bargain, as they were in the Prudential case, there must be a just and reasonable apportionment of the total consideration given for all elements of the bargain, including the subject matter of the transaction, to arrive at the chargeable consideration for LTT purposes.
However, there may be cases where the agreement for the sale of the land is so interlocked with the agreement for works that it cannot be independently completed.
For example, this may be the case where the agreements provide that, if default occurs on one agreement, the other cannot be enforced.
In such cases, the subject matter of the land transaction will be the land with the works to be completed.
LTTA/2380 Carrying out of works
(Schedule 4 paragraph 11)
Where the whole or part of the consideration for a land transaction includes a buyer carrying out works of construction, improvement or repair of a building or other works to enhance the value of land, these are not chargeable consideration if:
- they are carried out after the effective date of the transaction, and
- they are to be carried out on the land acquired (or to be acquired by the transaction) or any other land held by the buyer or a person connected with them, and
- it is not a condition of the transaction that the seller or a person connected to them carries out the works
If these conditions are not met, the value of the works carried out on an open market basis will be chargeable consideration for the transaction. For LTT the open market value is to include any amount of VAT that would be payable on the amount of the works.
In situations where the transaction is a notifiable transaction both at substantial performance and upon completion, if the works were carried out after the effective date for the substantial performance, it is taken as met for the completion of the transaction (even where the works were started (or completed) between the date of substantial performance and the date of completion of the contract).
Special rules apply in relation to arrangements involving public or educational bodies.
LTTA/2390 Provision of services
(Schedule 4 paragraph 12)
If the whole or part of the consideration for the land transaction is the provision of services (excluding those of carrying out works), the open market value of those services, to include VAT that would be payable on that open market value, is chargeable consideration.
Special rules apply in relation to arrangements involving public or educational bodies.
LTTA/2400 Debt as consideration
(Schedule 4 paragraph 8)
If consideration for a land transaction consists in whole or in part of the satisfaction or release of debt owed by the seller, or the assumption of debt, the amount of debt that is satisfied, released or assumed, is chargeable consideration.
Where there is an assumption of debt by the buyer, that can also, in certain circumstances, amount to a release of that same debt for the seller. In such a case the assumption of the debt alone is taken be the chargeable consideration.
The legislation also makes it clear that there is an assumption of debt by the buyer when the rights or liabilities of any party to the transaction are changed in relation to the debt. Thus a buyer assumes liability not only where they give a personal covenant but also where the seller is released from their personal covenant, or where the buyer agrees to indemnify the seller for any liability.
Where there is a transfer of a property subject to a debt, and the buyer assumes liability for all or part of that debt and either before or after the transfer (or both), the property is in joint ownership, the debt assumed is the proportion of the debt owed by the owners of the property. For joint tenants, the proportion of debt owed is calculated by dividing the total amount of the debt by the number of joint tenants. For tenants in common, the debt is apportioned in relation to the proportions of their respective undivided shares in the property.
For example, a property might be transferred from the sole ownership of the seller into the joint ownership of the seller and the buyer, for example on marriage or vice versa. In such a case the acquiring spouse, on becoming a joint tenant, will be treated, assuming no other consideration is given, as giving consideration of 50% of the outstanding debt on the effective date of the transaction (that is the debt divided by the 2 joint tenants).
A transferee normally accepts joint and several liability for any existing debt. However, the rule concerning the proportion of the debt assumed means that only that proportion is treated as chargeable consideration. This rule ensures that, despite the debt being joint and several, they are only liable on the relevant proportion of the debt which is established by their part share of the property.
LTTA/2410 Land transaction entered into by reason of employment
(Schedule 4 paragraph 13)
Where an employer (as seller) enters into a land transaction with an employee or a person connected to that employee (as buyer), and that land transaction is as a result of the employment then:
- if the land transaction is to provide accommodation for the performance of the employee’s duties, the chargeable consideration is anything actually paid by the employee in rent premium or consideration for the transfer
- if the transaction gives rise to a charge to tax under the taxable benefits rules for income tax (Chapter 5 of Part 3 of the Income Tax (Earnings and Pensions) Act 2003) and no rent is payable by the buyer or the rent payable is less than the cash equivalent of the benefit, the rent payable by the buyer is the amount of the cash equivalent that is chargeable under the respective income tax rules (Sections 105 and 106 of the Income Tax (Earnings and Pensions) Act 2003)
- if neither apply, then the chargeable consideration for the transaction is not less than market value of the subject-matter on the effective date of the transaction
LTTA/2420 Cases where conditions for land transaction to be exempt not fully met
(Schedule 4 paragraph 9)
Where a land transaction would be exempt from charge because it is an assent or appropriation by a personal representative but the acquirer (buyer) gives consideration in money or money’s worth for the subject matter of the transfer then, other than the assumption of debt secured on the property, that consideration is chargeable consideration.
Where the land transaction would be exempt from charge because it is a variation of a testamentary disposition etc. but the acquirer (buyer) gives consideration in money or money’s worth for the subject matter of the transfer, other than the variation of another disposition, the consideration given is chargeable consideration.
LTTA/2430 Obligations, agreements and payments that are not chargeable consideration
The legislation in relation to obligations, agreements and payments that are not chargeable consideration is in Schedule 4 LTTA 2017 paragraphs 14 to 18.
LTTA/2430a Indemnity given by the buyer in relation to ongoing liabilities or obligations
(Schedule 4 paragraph 14)
Where the buyer provides an indemnity to the seller in relation to ongoing liabilities in relation to the land (including lease covenants), neither the agreement to provide the indemnity nor any actual payments made before or at the time of the effective date, nor subsequently to that date, are chargeable consideration.
LTTA/2430b Buyer bearing inheritance tax liability
(Schedule 4 paragraph 15)
Where a land transaction occurs that is:
- a transfer of value within section 3 of the Inheritance Tax Act 1984, or
- a disposition effected by will or intestacy, and
- the buyer becomes liable to pay, does pay, or agrees to pay, any inheritance tax in respect of that transfer
that liability or agreement to pay (or actual payment) of inheritance tax is not chargeable consideration. Any other consideration given (for example assumption of debt or equity payment made to the executor or another beneficiary of the will) is chargeable consideration.
LTTA/2430c Buyer bearing capital gains tax liability
(Schedule 4 paragraph 16)
Where a land transaction occurs and the subject-matter that is:
- acquired otherwise than by a bargain at arms length, or
- treated by section 18 of the Taxation of Chargeable Gains Act 1992 (transactions between connected persons) as so acquired, and
- the buyer becomes liable to pay, does pay, or agrees to pay, any capital gains tax in relation to the corresponding disposal,
if there is no other chargeable consideration given, that liability, agreement to pay, or actual payment of capital gains tax is not chargeable consideration.
In the event that the agreement for the transfer includes other chargeable consideration (for example the assumption of debt or a payment of only a proportion of the market value of the property), the liability, agreement to pay or actual payment of capital gains tax will also be chargeable consideration.
For further information on the meaning of a connected person.
LTTA/2430d Costs of enfranchisement
(Schedule 4 paragraph 17)
Where a buyer meets the costs of a landlord in relation to the grant, extension or enfranchisement of a lease under:
- section 9(4) of the Leasehold Reform Act 1967, or
- section 33 of the Leasehold Reform, Housing and Urban Development Act 1993;
those costs are not chargeable consideration.
Other payments made for the grant, extension or enfranchisement will be chargeable consideration. In relation to enfranchisement for rules on calculation of liability.
LTTA/2430e Costs and compensation arising under a compulsory purchase
Any costs under section 23 Compulsory Purchase Act 1965 and any payment of compensation for disturbance or other matters not directly based on the value of land under section 5(6) Land Compensation Act 1961 are not chargeable consideration.
LTTA/2430f Arrangements involving public or educational bodies
(Schedule 4 paragraph 18)
These rules apply to certain arrangements involving the transfer of land and buildings, including innovative financing arrangements, between the public and private sectors. The arrangement has at its centre a sale and leaseback. However, these specific rules have the effect that the usual rules relating to exchanges do not apply.
Where a qualifying body:
- transfers, or grants or assigns a lease, to a non-qualifying body or person – the main transfer
- in consideration (in whole or part) for a lease or sub lease (of the whole or substantially the whole of what was transferred by the qualifying body) – the leaseback
- that non-qualifying person is to carry out works or services for the qualifying body, and
- some or all of the consideration given by the qualifying body for the carrying out the works or services is money;
then, in relation to the transfer from the qualifying body, including any surplus land, (the main transfer) the following are not chargeable consideration:
- the leaseback
- the works or services carried out by the non-qualifying body
and, in relation to the transfer from the non-qualifying body or person (the leaseback) the following are also not chargeable consideration:
- the main transfer
- any transfer of surplus land
- the consideration in money paid by the qualifying body for the works or services
As a result, LTT will generally only be charged on the premium or rent paid by the non-qualifying body or person to the qualifying person in relation the main transfer and that there is no chargeable consideration payable by the qualifying body for the leaseback.
The above treatment is not changed in the event that the qualifying body also transfers, grants or assigns a lease, for any other land to the non-qualifying body or person – the surplus land.
The following are qualifying bodies for the purpose of these rules:
- public bodies within paragraph 1 of Schedule 20 LTTA or a body specified in regulations under that paragraph
- institutions within the further or higher education sectors within the meaning of section 91 of the Further and Higher education Act 1992
- further education corporations within the meaning of Section 17 of the Further and Higher education Act 1992, or
- higher education corporations within the meaning of section 90 of the Further and Higher education Act 1992.
LTTA/2440 Contingent, uncertain or unascertained consideration
(sections 19 and 20)
Chargeable consideration that is contingent or uncertain can be deferred, if all of the relevant conditions are met.
Where a contingency affects the eventual amount of consideration, buyers must calculate the consideration on the basis that the contingent amount will be payable. If the contingency is that an amount will no longer be payable, buyers must assume that that amount does not cease to be payable.
Contingent therefore means that an amount is to be paid only if a specified future event occurs, or, that the amount will cease to be paid if a specified future event occurs.
For the purposes of this section of guidance, uncertain (when in relation to consideration) means that the amount, or value of consideration cannot be accurately calculated as it depends on uncertain future events.
Where the consideration is uncertain, buyers must make a reasonable estimate of the final consideration as at the effective date of the transaction. In the case of uncertain consideration where the taxpayer believes that the likelihood of the uncertain future event arising is low, it may be reasonable for them to request a nil deferral.
When making a deferral request, the buyer should be aware of the guidance on interest on deferred amounts available at LTTA/6200.
Unascertained consideration is that which is ascertainable but has yet to be calculated. The tax on consideration which is only unascertained cannot be deferred.
If the amount is understated or overstated in the return and additional tax is payable, or a repayment is due to the taxpayer, they must submit a further return or make a claim for repayment.
The following table sets out when tax can be deferred in certain circumstance.
|Unascertained consideration||Uncertain consideration||Contingent consideration||Deferrable|
|No||No||Yes||Yes (Example 1)|
|Yes||Yes||No||Yes (Example 2)|
|Yes||No||No||No (Example 3)|
Where the chargeable consideration for a land transaction is in the form of an annuity, which is:
- payable for life
- in perpetuity
- for an indefinite period, or
- for a period which exceeds 12 years
the chargeable consideration will be taken to be a one-off payment comprising 12 year’s payments. If the payments vary, the 12 highest payments will be taken into account.
However, the annual amount is not treated as varying from year to year if that variation is based on the retail prices index, the consumer prices index or any similar index used to express a rate of inflation (for example CPIH).
Where the annual amounts payable are contingent, uncertain or unascertained, those amounts are to be established in the same manner as for other amounts of contingent, uncertain or unascertained consideration.
It should be noted that a taxpayer may not request a deferral of payment of tax related to consideration that consists of an annuity.
Where the chargeable consideration for the transaction consists of both:
- an annuity, and
- other contingent or uncertain consideration (other than rent), then
a taxpayer can request to defer the tax on the consideration other than the annuity. A taxpayer will also not need to make a further return, or be able to claim a repayment in the event that a contingency ceases or the consideration is ascertained.
The LTT return must be completed showing the amount of chargeable consideration calculated using these rules and made within the normal filing period (within 30 days following the effective date of the transaction).
LTTA/2460 Buyer is connected company – deemed market value rule
These rules apply to all transfers between a vendor (whether an individual or company) and a company connected to them, when the company is the buyer. The chargeable consideration for such transfers will be not less than the market value at the effective date, of the property transferred, irrespective of the consideration (or lack of it) actually passing.
Therefore, the rule that where there is no consideration given for the land transaction, it is exempt from charge to LTT, does not apply; rather it is replaced by the market value of the land and buildings.
Where a company acquires land from a seller who is connected to the company or some or all of the consideration consists of the issue or transfer of shares in a company that the seller is connected to (including the buyer itself) then the chargeable consideration is:
- the market value of the subject-matter of the transaction at the effective date of the transaction, and
- if the acquisition is the grant of a lease at a rent, that rent
Alternatively, if the amount of chargeable consideration given is greater than the market value rule expressed above then that actual chargeable consideration is assessable to LTT instead.
However, any other relevant conditions that make the transaction exempt from charge, or any relief that may be claimable on the transaction, still apply to transactions where the buyer is a connected company.
Additionally there are some specific rules that provide that market value will not be imposed.
A company includes any body corporate (although in relation to a partnership that is also a body corporate the partnership rules will apply). References to shares also include stocks and securities issued by a company.
LTTA/2470 Buyer is connected company – exceptions to deemed market value rule
The deemed market value rule for acquisitions by a connected company will not apply in any of the following circumstances where:
- immediately after the transaction the company holds the property as a trustee in the course of the business of the management of trusts. (Case 1)
- immediately after the transaction the company holds the property as trustee and the seller is only connected with the company by virtue of section 1122(6) of the Corporation Tax Act 2010. (Case 2)
- the seller is a company and the transaction is, or is part of, a distribution of assets, whether or not on the winding up of a company and the subject-matter of the transaction (or an interest from which the subject-matter of the transaction is derived) has not been the subject of a claim by the seller to group relief in the three years prior to the effective date of the transaction. (Case 3)
However, where the seller has had that group relief withdrawn following the claim, the exclusion to the market value rule provided by Case 3 will apply. This is because the claim to the relief has been withdrawn at the effective date of the transaction to which the exclusion applies.
If any of these exceptions apply, LTT will only be charged on the chargeable consideration paid.