LBTT Guidance on Non-Fully Met Exemption Conditions in Land Transactions

LBTT on inheritance-related transfers where consideration is given

Some land transfers linked to a deceased person’s estate would normally be exempt from LBTT, but that exemption can be lost if the person receiving the property gives consideration. Even then, the law still excludes certain items from the chargeable consideration, especially existing secured debt on the property and certain reciprocal variations of testamentary benefits.

• This rule applies to estate-related transactions that would otherwise be exempt under schedule 1, paragraph 6 or paragraph 7 of the LBTT legislation.
• If a beneficiary takes property subject to a mortgage or other secured debt that was secured on the property immediately after death, that assumed debt is left out of the LBTT consideration calculation.
• If beneficiaries vary testamentary entitlements and one variation is made in return for another, that counter-variation is not treated as chargeable consideration in a paragraph 7 case.
• The transaction is not automatically fully exempt once consideration is given; only the specific excluded items are ignored, and any other consideration may still be taxable.
• To analyse the position, check first whether the transaction would have been exempt apart from the consideration, then identify what consideration was given and whether any of it falls within the statutory exclusions.

Scroll down for the full analysis.

LBTT: when an inheritance-related exemption almost applies but consideration is given

This page explains a narrow but important LBTT rule. It deals with transactions connected with a deceased person’s estate that would normally be exempt, but where the exemption is lost because the person receiving the property gives some consideration. In those cases, the legislation says that certain amounts are still left out when working out the chargeable consideration.

What this rule is about

Under the LBTT rules, some transfers of land connected with administering a deceased person’s estate are exempt. Two examples are relevant here:

• an assent, agreement or appropriation by a personal representative, and
• certain variations of testamentary dispositions.

Those exemptions are aimed at situations where property passes under the estate machinery rather than by an ordinary purchase.

The difficulty arises where the person receiving the property gives something in return. Once consideration is given, the exemption may no longer apply. The legislation then has to answer a second question: if the exemption is lost, what exactly counts as chargeable consideration for LBTT?

What the official source says

The source refers to schedule 2 paragraph 9 of the Land and Buildings Transaction Tax (Scotland) Act 2013.

It says that where a transaction would otherwise be exempt under paragraph 6 of schedule 1, but for the fact that the person acquiring the property gives consideration, the chargeable consideration does not include any secured debt assumed by that person, so long as the debt was secured on the property immediately after the deceased’s death.

It also says that where a transaction would otherwise be exempt under paragraph 7 of schedule 1, but for failure to meet the condition that no consideration is given for the transaction other than the variation of another disposition, the chargeable consideration does not include the making of any variation of another disposition.

In short, the exemption may fail, but the legislation still strips out certain items from the LBTT consideration calculation.

What this means in practice

The rule prevents LBTT being charged on amounts that are closely tied to the estate administration or the rearrangement of testamentary benefits, rather than to a true purchase price.

There are two separate situations.

First, if property is transferred from an estate and the recipient takes it subject to a mortgage or other secured debt that already affected the property immediately after death, that assumed debt is ignored when calculating chargeable consideration, provided the transaction is one that would otherwise have fallen within the paragraph 6 exemption.

Second, if beneficiaries rearrange who gets what under the estate, and that rearrangement would otherwise have been exempt under paragraph 7, the fact that one variation is made in return for another does not itself count as chargeable consideration.

This does not mean the whole transaction is exempt. It means only that these specified items are excluded from the consideration figure. If there is other consideration, that other consideration may still be chargeable.

How to analyse it

A sensible way to approach the issue is to ask these questions in order:

• Is this a transaction connected with a deceased person’s estate, rather than an ordinary sale or transfer?
• Would the transaction have been exempt under paragraph 6 or paragraph 7 of schedule 1 if no consideration had been given?
• What is the consideration that causes the exemption to fail?
• Does any part of that consideration fall within the specific exclusions in schedule 2 paragraph 9?
• If so, what consideration remains after excluding those amounts?

For paragraph 6 cases, the key factual question is whether the debt assumed was secured on the property immediately after the deceased died. The source is specific on timing. A debt secured later, or not secured on the property at that point, would not obviously fall within this exclusion.

For paragraph 7 cases, the key question is whether the only item being excluded is the making of another variation of a disposition. If some separate payment, transfer of value, or other consideration is given, that separate element may still need to be counted.

Example

Illustration: a personal representative appropriates a house from an estate to a beneficiary. The house was already subject to a mortgage immediately after the deceased’s death, and the beneficiary takes responsibility for that mortgage. Assume that, apart from the giving of consideration, the transaction would have been exempt under paragraph 6. In that case, the assumed secured debt is left out when calculating chargeable consideration for LBTT.

Another illustration: two beneficiaries vary the will so that each gives up one testamentary entitlement in exchange for another. If the arrangement would otherwise have fallen within paragraph 7, the making of the counter-variation is not included as chargeable consideration merely because each variation is given in return for the other.

Why this can be difficult in practice

The source is short, but the underlying analysis can be fact-sensitive.

One difficulty is identifying whether the transaction really is one that would otherwise have been exempt. That requires going back to the separate exemption rules in schedule 1 and checking that all their conditions are met apart from the relevant consideration point.

Another difficulty is separating excluded consideration from non-excluded consideration. A transaction may involve a mixture of elements. For example, assumption of an existing secured debt may be excluded, but a separate balancing payment may not be.

The timing of the security is also important in paragraph 6 cases. The legislation, as summarised in the source, focuses on debt secured on the property immediately after death. That can matter where borrowing has been refinanced, replaced, or restructured during the estate administration.

In paragraph 7 cases, care is needed to distinguish a variation of another disposition from some other form of bargain or compensation between beneficiaries. The source only excludes the making of another variation, not every form of value passing between the parties.

Key takeaways

• Some inheritance-related land transactions lose their exemption if consideration is given, but certain items are still excluded from chargeable consideration.
• In paragraph 6 cases, assumed secured debt is ignored if it was secured on the property immediately after death.
• In paragraph 7 cases, the making of another variation of a disposition is not itself counted as chargeable consideration.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: LBTT Guidance on Non-Fully Met Exemption Conditions in Land Transactions

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