Schedule 4 – Chargeable consideration
170.LTT will be calculated by reference to the chargeable consideration given for the acquisition of the chargeable interest. This Schedule, introduced by section 18, sets out rules relating to determining the amount of the chargeable consideration.
Money or money’s worth
171.Paragraph 1 provides that unless expressly provided otherwise, the chargeable consideration for a land transaction is defined as any consideration given in money or money’s worth for the subject-matter of the transaction, directly or indirectly by the buyer or a person connected to the buyer.
Value added tax
172.Paragraph 2 provides that any VAT chargeable in respect of the transaction constitutes chargeable consideration, unless the seller has the option to charge VAT (for example, in the case of a new lease) but has not done so by the effective date of the transaction.
Postponed consideration
173.Paragraph 3 provides that the chargeable consideration is to be determined with no discount for any postponement of the right of the seller to receive it (or any part of it).
Just and reasonable apportionment
174.Paragraph 4 provides that where consideration is given in an agreement that comprises more than one land transaction or a land transaction and another matter, that consideration is to be apportioned to the (or each) relevant land transaction on a just and reasonable basis, and LTT will be assessed on the value of the consideration so apportioned. This would be relevant where, for example:
a buyer pays for the land and building and another amount to cover moveable items (such as white goods, curtains etc.); and
a contract covers the sale of land and an agreement for construction of buildings on the land.
Exchanges
175.Paragraph 5 provides that in cases where consideration in a land transaction is partly or entirely in the form of another land transaction (e.g. part-exchange of properties), each transaction is treated separately. This paragraph determines how the consideration is to be valued.
176.When the interest is a major interest in land (as defined in section 68), such as a freehold, the value of the consideration is the market value of the interest acquired (including rent, where the interest is a lease) and any VAT actually chargeable in respect of the acquisition. No regard is to be had to any reduction in market value resulting from anything done, the main purpose (or one of the main purposes) of which is to avoid LTT. This targeted anti-avoidance rule is to stop buyers manipulating the market value of the land to be exchanged so as to pay no, or a lower amount of, LTT.
177.Where the interest is not a major interest in land (such as an easement), it is only the actual consideration given that is relevant (and not the market value of the interest). Where there are two or more relevant acquisitions in one transaction, the chargeable consideration is to be apportioned appropriately to each transaction, by reference to the market value of each interest.
178.These provisions are subject to the rules on partition and do not apply to cases to which paragraph 18 applies (arrangements involving public or educational bodies).
Partition etc.: disregard of existing interest
179.Paragraph 6 provides that where land is partitioned, the share of that land held by the buyer immediately before the partition does not comprise chargeable consideration.
Valuation of non-monetary consideration
180.Paragraph 7 provides that non-monetary consideration (which comprises all consideration except money and debt) is to be valued at its market value, unless provided otherwise.
Debt as consideration
181.Paragraph 8 provides that the rules for the calculation of chargeable consideration for a transaction where there is an assumption, satisfaction or release of debt.
Cases where conditions for exemption not fully met
182.Paragraph 9 provides that where not all of the conditions for exemption are met under Schedule 3 paragraph 5 (assents and appropriations by personal representatives) and paragraph 6 (variation of testamentary dispositions etc.) in relation to a transaction, chargeable consideration for that transaction does not include any secured debt assumed (Schedule 3 paragraph 5(2)) or the making of a variation (Schedule 3 paragraph 6 (2)(b)) (as the case may be).
Conversion of amounts in foreign currency
183.Paragraph 10 provides that the amount or value of chargeable consideration is the amount in sterling and the sterling equivalent of an amount expressed in any other currency is to be ascertained by reference to the London closing exchange rate on the effective date of the transaction.
Carrying out of works
184.Paragraph 11 provides that where the whole or part of the consideration consists of construction, improvement, repair or other works to enhance the value of the land, the value of the works counts as chargeable consideration. However, such works will not count as chargeable consideration if they are carried out after the effective date of the transaction, on the land acquired (or some other land held by the buyer or somebody connected with the buyer), and are not required to be carried out by the seller under the transaction. This is subject to paragraph 18 (arrangements involving public or educational bodies).
Provision of services
185.Paragraph 12 provides that where the consideration consists of the provision of services (other than works of construction, improvement or repair of a building or other structure), its value is to be taken as open market value (including VAT) as at the effective date of the transaction. This is subject to paragraph 18 (arrangements involving public or educational bodies).
Land transaction entered into by reason of employment
186.Paragraph 13 provides that where the buyer is an employee whose rent is paid (wholly or partly) by their employer and the value of that rent is liable to income tax (as part of the employee’s income), the cash equivalent of that amount is to be taken as the rent payable by the buyer for the purposes of valuing chargeable consideration. Where the accommodation is provided for the performance of the employee’s duties (and so not liable to income tax), the value of the rent will not be taken to be chargeable consideration. In other cases, the chargeable consideration is the market value of the subject matter of the transaction.
Indemnity given by employer
187.Paragraph 14 provides that where an indemnity is given by the buyer to the seller in respect of certain third party liabilities that indemnity does not count as chargeable consideration.
Buyer bearing inheritance tax liability capital gains tax liability
188.Paragraph 15 provides that where the buyer pays the inheritance tax due on an interest acquired under the conditions set out, that amount of inheritance tax does not count as chargeable consideration.
Buyer bearing capital gains tax liability
189.Paragraph 16 provides that where the buyer pays capital gains tax due on an interest bought (and there is no other consideration), that amount does not count as chargeable consideration.
Costs of enfranchisement
190.Paragraph 17 provides that the costs of enfranchisement, as defined, borne by the buyer do not count as chargeable consideration.
Arrangements involving public or educational bodies
191.Paragraph 18 provides that where certain qualifying public or educational bodies (“A”) transfer an interest to another party (“B”), which is then leased back from B to A, the following does not count as chargeable consideration:
(for the main transfer) the lease-back, building works or the provision of services by B); or,
(for the lease-back) the main transfer, the transfer of surplus land or money paid to B for building works or provision of services.
