Schedule 2 – Chargeable consideration
171.This schedule, which is introduced by section 17, sets out the provisions for determining the amount of the chargeable consideration in relation to a land transaction.
172.Paragraph 1 defines the chargeable consideration for the transaction to be any consideration given in money or money’s worth for the subject-matter of the transaction, directly or indirectly by the buyer or a connected party.
173.Paragraph 2 clarifies that any VAT due on the consideration is included as chargeable consideration. 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.
174.Paragraph 3 ensures that, 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.
175.Paragraph 4 provides for just and reasonable apportionment of consideration where the subject-matter of a transaction does not just consist of a chargeable interest (for example, where a business such as a public house, hotel or care home is sold as a going concern and the consideration includes an element of value attributed to “goodwill”) or where the transaction is part of a bargain including other transactions. Another scenario in which paragraph 4 is relevant is when a land transaction involves a contract for the sale of land and an agreement for construction of buildings on the land. If the land transaction comprises two severable agreements, the cost of the building works can be discounted when determining the chargeable consideration. If there is only one agreement, then the chargeable consideration will include some or all of the costs of the building, and paragraph 4 provides that the apportionment between the cost of the land and the cost of the development works must be just and reasonable.
176.Paragraph 5 determines how the chargeable consideration for exchanges of interest in land should be calculated. The calculation will depend on whether the subject-matter of any of the transactions is a major interest in land as defined in section 59. If this is the case, where a single relevant acquisition or two or more relevant acquisitions are made then the chargeable consideration for each relevant acquisition will be the greater of the market value of the subject-matter of the acquisition, or if the acquisition is the grant of a lease, the rent and the amount which would be the chargeable consideration for the acquisition if this paragraph was not applied.
177.If the subject-matter of none of the relevant transactions is a major interest in land then where a single relevant acquisition is made in consideration of one or more relevant disposals, in calculating the chargeable consideration for each relevant acquisition, the values of the interests being exchanged are disregarded but any other chargeable consideration will remain liable to tax. Where two or more relevant acquisitions are made in consideration of one or more relevant disposals, in calculating the chargeable consideration for each relevant acquisition the appropriate proportion of the values of the interests being exchanged are disregarded but any other chargeable consideration will remain liable to tax. Sub-paragraph (6) sets out the formula for calculating the appropriate proportion. This paragraph is subject to paragraph 6 (Partition etc.: disregard of existing interest). This paragraph does not apply in a case to which paragraph 17 (Arrangements involving public or educational bodies) applies.
178.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.
179.Paragraph 7 provides a general rule that any non-monetary consideration is to be valued at its market value, unless provided otherwise. Non-monetary consideration comprises all consideration except money and debt.
180.Paragraph 8 ensures that the assumption or release of debt by the buyer counts as chargeable consideration for a transaction, but that the amount so chargeable cannot exceed the market value of the subject-matter of the transaction. The assumption of debt for the purposes of this paragraph does not include any mortgage or similar security taken out in order to acquire the property.
181.Paragraph 9 sets out how the chargeable consideration will be calculated for transactions where the exemptions provided for at paragraph 6 (assents and appropriations by personal representatives) and paragraph 7 (variation of testamentary dispositions etc.) of schedule 1 (exempt transactions) do not apply because of paragraph 6(2) and paragraph 7(3) of that schedule
182.Paragraph 10 provides for consideration in a foreign currency to be converted into sterling on the effective date of the transaction.
183.Paragraph 11 sets out how to calculate chargeable consideration where the buyer or the seller carries out works of construction, improvement or repair of a building or other structure. Where those works are carried out after the effective date on land acquired or to be acquired by the buyer under the transaction (or on any of the buyer's other land) and it is not a condition of the transaction that the seller carry them out on the buyer's behalf, then the works do not comprise chargeable consideration. In other cases they do, at their open market value. Where by virtue of section 10(3) (substantial performance of contract without completion) there are two notifiable transactions, the condition in sub-paragraph (2) is treated as being met in relation to the second transaction if it is met in relation to the first. This paragraph is subject to paragraph 17 (arrangements involving public or educational bodies).
184.Paragraph 12 sets out that where the buyer provides services (other than works of construction, improvement or repair of a building or other structure), the chargeable consideration is the open market value of those services. This paragraph is subject to paragraph 17 (arrangements involving public or educational bodies).
185.Paragraph 13 deals with the situation where the seller is an employer and the buyer the employee of that employer. The chargeable consideration is not less than the market value of the subject-matter on the effective date of the transaction.
186.Paragraph 14 ensures that indemnities given by the buyer to the seller for any on-going liabilities relating to the land do not count as chargeable consideration.
187.Paragraph 15 ensures that where a buyer in a land transaction is required to pay any Inheritance Tax associated with the transaction, then the amount paid does not count as part of the chargeable consideration for LBTT purposes.
188.Paragraph 16 ensures that where a buyer in a land transaction is required to pay any Capital Gains Tax associated with the transaction, then the amount paid does not count as part of the chargeable consideration for LBTT purposes.
189.Paragraph 17 applies in the situation where certain public or educational bodies sell or grant a long lease to another party over land/property and then the other party leases the land back to the public or educational body. The public or educational body is not liable for LBTT because the leaseback by the public or educational body and any money for works or services are not considered as part of the chargeable consideration. The other party also does not have to pay LBTT based on the market value of the land/property that party buys or leases, so the party only has to pay it on the actual cash premium or rent the party pays the public or educational body in exchange for entering into the deal. Sub-paragraph (2) lists the qualifying bodies. Sub-paragraph (3) confers a power on the Scottish Ministers to modify, by order, the list of qualifying bodies set out at sub-paragraph (2). Orders under paragraph 17 will be subject to the negative procedure (see section 67).
