Guidance on Debt as Chargeable Consideration in Land and Buildings Transaction Tax
LBTT when debt counts as consideration in a property transfer
LBTT can apply even if little or no cash is paid for a property. If the buyer takes on an existing mortgage or other debt, or if a debt is released as part of the transfer, that debt may count as chargeable consideration. The key issue is whether there is an existing debt linked to the property and whether anyone’s liability for it changes as part of the transaction.
- Debt can count as chargeable consideration if it is assumed, released or discharged in connection with a land transaction, but the amount counted cannot exceed the market value of the property transferred.
- This often matters in transfers between co-owners or partners, such as adding someone to the title, transferring a share, or buying out another owner.
- A new mortgage taken out for the transaction is not usually treated as assumption of an existing debt, so it may not create chargeable consideration from debt on its own.
- Where property is owned in shares, any secured debt is normally attributed in proportion to the share acquired, so taking a half share of a mortgaged property may mean half the mortgage is treated as consideration.
- The legal detail matters: LBTT may depend on whether the lender releases someone, the buyer becomes liable for the existing debt, or one party indemnifies another against that debt.
- ADS must be considered separately, as a transaction can involve debt-based chargeable consideration for LBTT and also trigger ADS depending on the buyer’s wider property ownership.
Scroll down for the full analysis.
Read the original guidance here:
Guidance on Debt as Chargeable Consideration in Land and Buildings Transaction Tax
LBTT and debt as consideration in a land transaction
This page explains when debt counts as chargeable consideration for Land and Buildings Transaction Tax (LBTT). This matters because a transfer of property can be taxable even where little or no cash changes hands. If the buyer takes on an existing debt, or a seller’s debt is released as part of the deal, that debt may itself be the consideration on which LBTT is charged.
What this rule is about
LBTT is charged by reference to the chargeable consideration for a land transaction. In many transactions that is simply the price paid in money. But the legislation also treats certain forms of debt as consideration.
The practical point is straightforward: a property transfer is not automatically free of LBTT just because the parties say there is “no payment”. If the buyer takes responsibility for an existing mortgage or other debt, or if a debt is released in connection with the transfer, that can create chargeable consideration.
This issue often arises when:
- one co-owner transfers a share of a property to another;
- an unmarried couple puts a home into joint names;
- one owner buys out the other’s share;
- a property is transferred subject to an existing secured loan;
- there is a release or satisfaction of debt instead of a cash payment.
What the official source says
Revenue Scotland’s guidance says that chargeable consideration can include:
- the satisfaction or release of a debt due to the buyer or owed by the seller; and
- the buyer’s assumption of an existing debt.
This can apply whether the debt is assumed, released or satisfied in whole or in part.
The amount of the debt that is satisfied, released or assumed determines the amount of chargeable consideration. However, the guidance states that this amount cannot exceed the market value of the property transferred.
For LBTT purposes, a buyer is treated as assuming a debt where, in connection with the land transaction:
- a debt is secured on the property immediately before and immediately after the transaction, and the rights or liabilities of a party in relation to that debt change;
- there is an agreement under which a person becomes liable for an existing debt when they were not previously liable; or
- one party indemnifies another against liability for a debt.
The guidance also says that if a debt is discharged or released, in whole or in part, in connection with the land transaction, the amount discharged or released forms chargeable consideration.
Where property is held in undivided shares, and a secured debt is assumed, the chargeable consideration is the proportion of the debt that corresponds to the person’s share of the property. Revenue Scotland illustrates this with a property subject to a £500,000 mortgage: if a further person acquires an equal half share, the chargeable consideration is £250,000.
The guidance defines debt widely as an obligation to pay money, whether certain or contingent, now or in the future.
What this means in practice
The key practical question is not just whether there is borrowing, but whether there is an existing debt connected with the property and whether someone’s liability for that debt changes as part of the transaction.
A new mortgage taken out at the same time as the transfer is not the same thing as assumption of an existing debt. Revenue Scotland’s example makes this clear: if one partner transfers a half share of a home to the other and they take out a new joint mortgage, there is no assumption of an existing debt, so on those facts there is no chargeable consideration from debt.
By contrast, if the incoming owner agrees to take on liability for an existing mortgage, that existing debt can be chargeable consideration. The amount is based on the debt assumed, plus any cash paid.
This is particularly important in transfers between partners or co-owners. People often think a transfer is tax-free because no money is paid between them. That may be wrong if the transferee takes over responsibility for an existing mortgage.
The guidance also shows that legal form matters. If one owner transfers their share but there is no change in either party’s liability for the mortgage, there may be no chargeable consideration from debt at all. So the tax result can turn on whether:
- the lender releases someone from liability;
- the transferee becomes liable to the lender; or
- the transferee indemnifies the transferor against the debt.
These are not just drafting details. They can determine whether LBTT is due.
How to analyse it
A sensible way to analyse the transaction is to work through these questions.
Is there a land transaction?
The guidance assumes there is a transfer of property or of a share in property.
Is there an existing debt connected with the property?
This commonly means an existing mortgage, but the guidance uses a wider concept of debt.
Does the buyer assume that existing debt?
Look for a real change in rights or liabilities. Has the buyer become liable where they were not liable before? Has the lender kept the security in place before and after the transfer while the parties’ liabilities changed? Has one party indemnified another?
Has any debt been released or discharged in connection with the transfer?
If so, the amount released may itself be chargeable consideration.
Is there also any cash or other consideration?
If yes, that is added to the debt element.
If the property is held in shares, what share is being acquired?
For secured debt on jointly held property, the guidance attributes the debt proportionately to the share acquired.
Is Additional Dwelling Supplement (ADS) potentially in point?
The guidance’s examples show that ordinary LBTT and ADS must be considered separately. A transaction may have chargeable consideration from debt and also trigger ADS, depending on the wider dwelling ownership position.
Example
Illustration: A owns a dwelling in sole name, subject to an existing mortgage of £300,000. A transfers a half share to B. B pays no cash, but agrees to take responsibility for half of the existing mortgage.
On Revenue Scotland’s approach, the chargeable consideration is £150,000, being half of the existing mortgage. LBTT is then considered on that amount. If B’s wider property position means ADS applies, ADS is considered on the same chargeable consideration.
By contrast, if A transfers the half share to B and they replace the old loan with a completely new joint mortgage, the guidance says there is no assumption of an existing debt. On those facts, there is no chargeable consideration from debt simply because the new mortgage is being entered into.
Why this can be difficult in practice
The difficult part is often identifying whether there has really been an assumption of debt, rather than just a transfer of property alongside unchanged borrowing.
Several points can be fact-sensitive:
- whether the debt is truly an existing debt, as opposed to new borrowing put in place for the transaction;
- whether the lender has released a party from liability;
- whether an indemnity changes the position even if the lender’s rights formally remain the same;
- how to attribute debt where ownership is in undivided shares;
- whether ADS applies, which depends on the separate dwelling rules and not just on the debt analysis.
The guidance also includes a specific point on pension fund transfers. Revenue Scotland says that where a pension fund purchases property, the transaction is a land transaction and LBTT applies if there is chargeable consideration. But the assumed liability to pay pension benefits will not generally be treated as chargeable consideration in the form of debt. Any money or money’s worth given for the transfer remains chargeable. This is a specialised area, and the guidance notes that Revenue Scotland changed its position in a technical bulletin issued in December 2017. It also notes that repayment claims may be possible for earlier returns, subject to the time limits and the relevant repayment mechanism.
That pension point shows an important general theme: not every liability associated with a transaction is treated as debt consideration. The legal character of the liability matters.
Key takeaways
- A property transfer can attract LBTT even if no cash is paid, if the buyer assumes an existing debt or a debt is released as part of the deal.
- A new mortgage is not the same as assumption of an existing debt; the tax result may differ significantly.
- In share transfers and buy-outs, the exact change in mortgage liability, release, or indemnity can determine whether there is chargeable consideration.
This page was last updated on 24 March 2026
Useful article? You may find it helpful to read the original guidance here: Guidance on Debt as Chargeable Consideration in Land and Buildings Transaction Tax
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