Indemnities by purchaser not chargeable consideration for land-related liabilities

SDLT and purchaser indemnities

For SDLT, a buyer’s indemnity to the seller for ongoing liabilities connected with the land is not treated as chargeable consideration. This includes indemnities for lease covenant liabilities, but the point is narrow and only applies where the clause is a genuine indemnity rather than part of the price or another taxable assumption of liability.

• A true purchaser indemnity for future or continuing land-related liabilities does not increase the SDLT consideration.
• This specifically includes indemnities linked to lease covenants, such as on an assignment of a lease.
• Not every buyer obligation is ignored for SDLT; payments, reimbursements of known sums, or debt assumptions may still be taxable.
• The key issue is substance over label: a clause called an indemnity may still count as consideration if it really operates as part of the price.
• In practice, this often matters in lease assignments, transfers of reversionary interests, and similar transactions where the seller wants protection after completion.

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SDLT and purchaser indemnities: when an indemnity is not chargeable consideration

This page explains a narrow but important SDLT point. If a buyer agrees to indemnify the seller against ongoing liabilities connected with the land, that indemnity does not count as chargeable consideration for SDLT. This matters because SDLT is charged by reference to chargeable consideration, so the boundary between a taxable payment and a non-taxable indemnity can affect the SDLT calculation.

What this rule is about

In land transactions, a buyer may do more than pay a price. The buyer may also agree to take on responsibilities linked to the property. One example is where the buyer promises to reimburse or protect the seller if liabilities arise after completion. That promise is often described as an indemnity.

The rule here deals with a specific type of indemnity: one given by the purchaser to the vendor for ongoing liabilities relating to the land. The official material also makes clear that this includes liabilities under lease covenants.

The question is whether that promise itself forms part of the consideration for SDLT purposes. The official answer is no.

What the official source says

The source states that indemnities given by the purchaser to the vendor for any ongoing liabilities relating to the land do not count as chargeable consideration. It expressly includes indemnities relating to lease covenants.

This is a statement about what is and is not included in chargeable consideration. It does not say that every obligation assumed by a buyer is ignored for SDLT. It is limited to indemnities of this kind.

What this means in practice

If the buyer gives the seller an indemnity against future liabilities connected with the property, that indemnity is not itself added to the SDLT consideration.

In practical terms, this means you should not automatically treat every buyer promise as taxable consideration. A promise to protect the seller against future property-related liabilities is different from paying the seller money or assuming a liability in a way that the SDLT rules treat as consideration.

This point often matters on assignments of leases, transfers of reversionary interests, or other transactions where the seller wants protection against liabilities that may continue after the transfer. A common example is where the buyer covenants to observe tenant obligations and indemnifies the outgoing tenant against breaches after assignment. The source indicates that this kind of indemnity does not count as chargeable consideration.

That can make a real difference to the SDLT computation. The taxable amount is based on the actual chargeable consideration, not on every contractual promise in the transfer documents.

How to analyse it

When reviewing a transaction, it helps to ask these questions:

• What exactly has the buyer promised to do?
• Is the promise an indemnity in favour of the seller?
• Does the indemnity relate to ongoing liabilities connected with the land?
• Is the liability one that may continue after the transaction, such as liability under lease covenants?
• Or is the buyer actually paying money, reimbursing a known amount, or assuming a liability in a way that may fall within the wider SDLT consideration rules?

The key distinction is between a true indemnity against future or continuing land-related liabilities and something that is, in substance, part of the price or assumption of debt. The source only addresses the former.

Example

Illustration: A tenant assigns its lease to a new tenant. Under the licence and assignment documents, the assignee agrees to indemnify the outgoing tenant against future claims arising from tenant covenants in the lease after the assignment date. Under the official source, that indemnity does not count as chargeable consideration for SDLT.

That does not mean nothing else in the transaction is chargeable. If the assignee also pays a premium or gives other consideration, those elements must still be considered under the normal SDLT rules.

Why this can be difficult in practice

The main difficulty is classification. Transaction documents often contain several obligations, and not all of them are true indemnities. A clause may be labelled an indemnity but, in substance, operate as a payment obligation or reimbursement of an existing liability. The source does not provide a full test for drawing that line, so the facts and drafting matter.

Another practical issue is that lease transactions often involve overlapping concepts: covenant assumption, indemnity, rent, service charge liabilities, apportionments, and payments to the outgoing tenant. Some of these may affect SDLT, while a pure indemnity for ongoing land-related liabilities does not. It is important to identify which element is which, rather than treating the whole package in the same way.

The source is also brief. It states the treatment of indemnities of this kind, but it does not attempt to explain every nearby scenario. So care is needed before extending the point beyond its actual wording.

Key takeaways

• A purchaser’s indemnity to the seller for ongoing liabilities relating to the land is not chargeable consideration for SDLT.
• This includes indemnities relating to lease covenants.
• The difficult question is often whether a clause is truly an indemnity, or whether it is really part of the price or another form of taxable consideration.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Indemnities by purchaser not chargeable consideration for land-related liabilities

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