LBTT Guidance: Buyer Capital Gains Tax Liability in Land Transactions

LBTT treatment where a buyer takes on the seller’s Capital Gains Tax

In some Scottish land transactions that are not at arm’s length, a buyer may agree to pay the seller’s Capital Gains Tax or become liable for it. Normally, taking on a seller’s liability may count as chargeable consideration for LBTT, but there is a specific exception. That exception only applies if there is no other chargeable consideration in the transaction.

• The rule applies only to acquisitions that are not bargains made at arm’s length, including certain connected-party transactions.
• If the buyer pays or becomes liable for CGT due on the seller’s disposal of the same property interest, that payment can be ignored for LBTT.
• The exclusion is lost if there is any other chargeable consideration, such as money or another item of value.
• You must review the whole transaction carefully, because even a mainly gift-based transfer may contain other consideration.
• The CGT must relate to the seller’s disposal of the same chargeable interest being acquired by the buyer.
• A common example is a parent transferring property to an adult child with no price paid, where the child agrees to meet the parent’s CGT and nothing else is given.

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LBTT and a buyer taking on the seller’s capital gains tax liability

This page explains a narrow but important LBTT rule. In some non-arm’s length land transactions, the buyer may agree to pay the seller’s Capital Gains Tax, or may become liable for it. The question is whether that tax payment is itself part of the chargeable consideration for LBTT. The official rule says that, in specific circumstances, it is ignored. But that exclusion falls away if there is any other chargeable consideration for the transaction.

What this rule is about

LBTT is charged by reference to the chargeable consideration given for a land transaction. In broad terms, chargeable consideration is what the buyer gives, directly or indirectly, for the land.

Normally, if a buyer takes on one of the seller’s liabilities, that can raise the question whether the buyer has given something of value for the property. This guidance deals with one particular liability: Capital Gains Tax arising on the seller’s disposal of the land.

The rule only applies in transactions that are not bargains made at arm’s length, including transactions that are treated as such because the parties are connected for capital gains tax purposes under section 18 of the Taxation of Chargeable Gains Act 1992.

What the official source says

Schedule 2 paragraph 16 of the Land and Buildings Transaction Tax (Scotland) Act 2013 provides a specific exclusion.

Where:

• the chargeable interest is acquired otherwise than by a bargain made at arm’s length, or is treated as so acquired under the connected persons rule in section 18 of the Taxation of Chargeable Gains Act 1992, and
• the buyer is or becomes liable to pay, or actually pays, any Capital Gains Tax due on the seller’s corresponding disposal of that chargeable interest,

the buyer’s liability or payment is not treated as chargeable consideration for LBTT.

However, the exclusion does not apply if there is any other chargeable consideration for the transaction.

What this means in practice

The rule is aimed at a particular situation: a non-arm’s length transfer where the buyer bears the seller’s Capital Gains Tax bill. If the transfer is otherwise gratuitous, or there is no other chargeable consideration, that CGT liability or payment is ignored for LBTT purposes.

That can prevent an LBTT charge arising solely because the buyer has agreed to meet the seller’s CGT.

But the protection is fragile. If there is any other chargeable consideration, the exclusion does not apply. The source material does not expand on the consequences beyond that point, but the practical message is clear: once the transaction includes some other chargeable consideration, you cannot rely on paragraph 16 to disregard the buyer’s assumption or payment of the seller’s CGT liability.

This means you need to look at the whole transaction, not just the CGT element.

How to analyse it

A sensible way to approach this rule is to ask the following questions.

• Is this a land transaction for LBTT involving a chargeable interest?
• Was the acquisition made otherwise than by a bargain at arm’s length?
• If not obviously, are the parties connected so that section 18 of the Taxation of Chargeable Gains Act 1992 treats the transaction as not being at arm’s length for these purposes?
• Is the buyer paying, or becoming liable to pay, Capital Gains Tax that is due on the seller’s disposal of that same chargeable interest?
• Is there any other chargeable consideration in the transaction?

If the answers to the first four questions are yes, and the answer to the last question is no, the buyer’s assumption or payment of the seller’s CGT is excluded from chargeable consideration.

If there is other chargeable consideration, the exclusion does not apply.

In practice, this means conveyancers and advisers should examine all elements of value moving from buyer to seller, or provided on the seller’s behalf. Even a transaction that is mainly intended as a gift may include another form of consideration.

Example

Illustration: A parent transfers Scottish property to an adult child for no price. Because they are connected persons, the transaction is treated as not being at arm’s length for this rule. The child agrees to pay any Capital Gains Tax arising on the parent’s disposal of the property. If there is no other chargeable consideration, paragraph 16 says that the child’s payment or assumption of that CGT liability is not chargeable consideration for LBTT.

Now change the facts slightly. Suppose the child also pays the parent a sum of money for the property. There is now other chargeable consideration. On the wording of the rule, the paragraph 16 exclusion does not apply.

Why this can be difficult in practice

The main difficulty is identifying whether there is any other chargeable consideration. The guidance is brief and does not list what might count in borderline cases. Real transactions may involve mixed elements, such as cash, debt assumptions, releases of obligations, or arrangements that are not obviously labelled as consideration.

Another practical issue is the phrase “corresponding disposal of the chargeable interest”. The CGT being paid must relate to the seller’s disposal of the same interest being acquired. If the tax payment relates to something wider or different, the rule may not fit.

There can also be uncertainty around whether a transaction is truly at arm’s length. The rule covers both transactions that are in fact not at arm’s length and transactions treated that way under the connected persons rule. Where the relationship between the parties or the surrounding arrangements is unusual, that characterisation may matter.

Finally, the source is guidance on a specific statutory exclusion. It does not say that every buyer payment of a seller tax liability is ignored. It only addresses this defined situation.

Key takeaways

• A buyer’s payment of the seller’s Capital Gains Tax can be ignored for LBTT, but only in a non-arm’s length transaction covered by the rule.
• The exclusion only applies where there is no other chargeable consideration.
• To apply the rule properly, you must review the full transaction, not just the CGT payment.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: LBTT Guidance: Buyer Capital Gains Tax Liability in Land Transactions

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