LBTT Guidance: Buyer Capital Gains Tax Liability in Land Transactions

LBTT treatment when a buyer pays the seller’s Capital Gains Tax

In some Scottish land transactions that are not at arm’s length, or are between connected persons, a buyer’s payment of the seller’s Capital Gains Tax may be ignored when working out chargeable consideration for LBTT. This exception is very limited and only applies if the buyer bears that CGT and there is no other chargeable consideration at all.

• The rule comes from schedule 2 paragraph 16 of the Land and Buildings Transaction Tax (Scotland) Act 2013.
• It applies only where the transfer is not at arm’s length, or is treated that way because the parties are connected under section 18 of the Taxation of Chargeable Gains Act 1992.
• If the buyer pays, or becomes liable to pay, CGT arising on the seller’s disposal, that payment can be left out of account for LBTT.
• The exclusion is lost if there is any other chargeable consideration, including money, debt assumed, or other value given for the land.
• This means all elements of the arrangement must be checked carefully; it is not a general exemption for paying someone else’s tax.

Scroll down for the full analysis.

LBTT and a buyer paying the seller’s Capital Gains Tax

This page explains a narrow but important LBTT rule. It deals with cases where land is transferred other than on normal arm’s length terms, or between connected persons, and the buyer agrees to bear the seller’s Capital Gains Tax on the disposal. In some cases, that tax payment is ignored for LBTT. In others, it is not.

What this rule is about

LBTT is charged by reference to the chargeable consideration for a land transaction. In broad terms, that means what the buyer gives, or is treated as giving, for the land.

Normally, if a buyer takes on a liability connected with the transaction, that can affect the amount treated as consideration. The rule covered here creates a specific exception for certain Capital Gains Tax liabilities.

The exception applies only in a limited type of case:

• the land is acquired otherwise than by a bargain made at arm’s length, or is treated that way because the parties are connected under section 18 of the Taxation of Chargeable Gains Act 1992; and
• the buyer is or becomes liable to pay, or actually pays, Capital Gains Tax due on the seller’s corresponding disposal of the land.

If those conditions are met, the buyer’s assumption or payment of that Capital Gains Tax is not treated as chargeable consideration for LBTT. But the exception is switched off if there is any other chargeable consideration.

What the official source says

The official guidance refers to schedule 2 paragraph 16 of the Land and Buildings Transaction Tax (Scotland) Act 2013.

Its effect is as follows:

• Where the acquisition is not at arm’s length, or is treated as such because the parties are connected, and
• the buyer pays, or becomes liable to pay, Capital Gains Tax arising on the seller’s disposal,
• that buyer-borne Capital Gains Tax is ignored for the purpose of working out chargeable consideration.

However, the guidance then makes an important qualification: this exclusion does not apply if there is any other chargeable consideration for the transaction.

So the relief is aimed at a very specific situation. It is not a general rule that a buyer can pay the seller’s tax without LBTT consequences.

What this means in practice

The practical question is whether the buyer’s payment of the seller’s Capital Gains Tax should itself increase the LBTT consideration.

In the limited cases covered by this rule, the answer may be no. The tax payment is ignored. That can matter where, for example, land is transferred within a family or within a connected group and the buyer agrees to meet the seller’s Capital Gains Tax bill.

But the exception is much narrower than it first appears. If there is any other chargeable consideration, the exclusion does not apply. That means you cannot assume that the Capital Gains Tax payment is ignored simply because the parties are connected or the deal is not at arm’s length.

In practice, this means you need to identify all forms of consideration, not just the tax payment. Even a small amount of other chargeable consideration may prevent the exclusion from operating.

How to analyse it

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

• Is there a land transaction for LBTT purposes involving a chargeable interest?
• Was the interest acquired otherwise than by a bargain made at arm’s length?
• If not obvious on the facts, are the parties connected so that section 18 of the Taxation of Chargeable Gains Act 1992 treats the acquisition as not being at arm’s length?
• Is the buyer liable to pay, or has the buyer actually paid, Capital Gains Tax arising on the seller’s corresponding disposal?
• Is there any other chargeable consideration for the transaction?

If the answers to the first four questions are yes, the buyer’s CGT payment is potentially ignored. But you must still ask the fifth question. If there is any other chargeable consideration, the exclusion does not apply.

This makes the identification of “other chargeable consideration” central. You need to look at the whole arrangement, not just the headline price. Consider whether the buyer is paying money, assuming debt, providing value in kind, or giving anything else that counts as consideration under the LBTT rules.

Example

Illustration: A parent transfers land to an adult child. The transfer is not an arm’s length bargain, and the parties are connected. The child agrees to pay the Capital Gains Tax arising on the parent’s disposal. If there is no other chargeable consideration, the child’s payment of that CGT is ignored for the purpose of this specific rule.

By contrast, if the child also pays a sum for the land, or gives some other chargeable consideration, the exclusion does not apply. In that case, the CGT payment cannot simply be ignored under this paragraph.

Why this can be difficult in practice

The main difficulty is that this rule sits inside the wider LBTT rules on chargeable consideration, and the guidance is brief. Several points can therefore be fact-sensitive.

• Whether the transaction is truly not at arm’s length may be straightforward in some family or connected-party cases, but less so in others.
• The connected-persons rule is imported by reference to section 18 of the Taxation of Chargeable Gains Act 1992, so you need to be clear whether that provision applies.
• The phrase “any other chargeable consideration” is very important. The guidance does not elaborate on borderline cases, so all elements of value passing from buyer to seller need to be checked carefully.
• The rule only addresses the buyer bearing Capital Gains Tax on the corresponding disposal. It does not create a broader principle for other taxes or liabilities.

The result is that the rule can be helpful, but only after the facts have been analysed closely. A reader should not treat it as an automatic exemption whenever a buyer agrees to pay the seller’s CGT.

Key takeaways

• A buyer’s payment of the seller’s Capital Gains Tax can be ignored for LBTT, but only in a limited class of non-arm’s length or connected-person transactions.
• The exclusion only applies where the buyer bears CGT on the seller’s corresponding disposal and there is no other chargeable consideration.
• The presence of any other chargeable consideration is critical and can prevent the exclusion from applying.

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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