Guidance on Determining Market Value for Land and Buildings Transactions

LBTT: Meaning of Market Value and When It Applies

For LBTT, you usually start with the price actually paid, but some transactions require you to use market value instead. This is especially important where part of the consideration is non-cash, such as services or works. Market value is based on a hypothetical open market sale or arm’s length cost, excludes VAT, and any valuation needed must be provided and supported by the buyer.

• For land and buildings, market value means the price reasonably expected in an open market sale between a willing buyer and a willing seller.
• If the consideration includes services or other non-cash items, you must use what they would reasonably cost on arm’s length open market terms.
• You cannot always rely on the contract price if the LBTT rules specifically require a market value figure.
• Market value for LBTT is stated without VAT, even if VAT is actually charged on the transaction.
• The buyer is responsible for obtaining and supporting any valuation, and Revenue Scotland may check it using professional valuers.

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LBTT: what “market value” means and when it matters

This page explains how market value is understood for Land and Buildings Transaction Tax (LBTT) purposes when the tax rules require you to use a market value figure rather than, or as part of, the actual price paid. The point matters because LBTT is charged by reference to chargeable consideration, and in some cases that means working out the market value of land, buildings, services, or other non-cash consideration.

What this rule is about

Most land transactions involve a cash price. In straightforward cases, that price is the starting point for LBTT. But some transactions are not purely cash-based, and some LBTT rules specifically require market value to be used.

The official guidance here deals with the meaning of market value in that context. It gives a general definition for land and buildings, explains how to value non-monetary consideration such as services, and makes clear that VAT is not included in the market value figure.

This is not a complete code for every valuation issue under LBTT. It is guidance on the meaning of market value where the legislation calls for it.

What the official source says

The guidance says that the market value of land or buildings is the price that might reasonably be expected to be obtained on a sale in the open market between a willing buyer and a willing seller. It says this definition is derived from sections 272 to 274 of the Taxation of Chargeable Gains Act 1992.

It also points to section 62 of the Land and Buildings Transaction Tax (Scotland) Act 2013, which is relevant where market value has to be used in determining chargeable consideration.

Where the consideration for a land transaction is provided through services or other non-monetary consideration, the guidance says the market value of those services is the amount they might reasonably be expected to cost if bought on arm’s length terms in the open market. The source cites schedule 2 paragraph 12 of the LBTT legislation for this point.

The guidance further states that the market value of land and buildings does not include VAT, even if VAT is chargeable on the actual transfer. The reason given is that market value is based on a hypothetical transaction rather than the actual deal that took place.

Finally, the guidance makes clear that if a valuation is needed, it is for the buyer to provide it. Revenue Scotland does not obtain or prepare valuations for the buyer, although it may use professional valuers to check a valuation or an apportionment.

What this means in practice

The practical message is that you cannot always rely on the contract price alone. If the LBTT rules require market value, or if part of the consideration is non-cash, you need a supportable valuation.

For land and buildings, the question is not “what did these parties agree?” but “what price might reasonably be expected in an open market sale between a willing buyer and willing seller?” That is a hypothetical test. It is intended to remove unusual features of the actual bargain that may not reflect open market conditions.

For services or other non-cash consideration, the focus shifts to what those services or items would have cost on arm’s length open market terms. In other words, if the buyer is providing something other than money in return for the land, you need to put a realistic market price on that non-cash element.

The point about VAT is easy to miss. If you are working out market value, the guidance says that figure should be stated without VAT. That remains so even if VAT is in fact chargeable on the transfer.

The responsibility point is also important. If your LBTT return depends on a valuation, you should expect to justify it. Revenue Scotland may test the figure, and a weak or informal estimate may not be enough where the valuation is material.

How to analyse it

A sensible way to approach the issue is to ask the following questions.

• Does the LBTT rule for this transaction require market value to be used at all?
• If so, what exactly must be valued: the land, the buildings, services, or some other non-monetary consideration?
• For land or buildings, what would a willing buyer and willing seller agree in an open market sale?
• For services or other non-cash consideration, what would those services or items reasonably cost if bought at arm’s length in the open market?
• Has VAT been wrongly included in a market value figure?
• Is the valuation evidence strong enough to support the LBTT position if questioned?

Where there is an apportionment between different elements of a transaction, the same discipline applies. The figures should be realistic and capable of support, because Revenue Scotland may review them with the help of professional valuers.

Example

Illustration: a buyer acquires land in Scotland and, instead of paying entirely in cash, agrees to carry out construction works for the seller as part of the deal. If the works form part of the consideration, the buyer cannot ignore them for LBTT purposes. The relevant figure is the market value of those services: what those works might reasonably be expected to cost if bought on arm’s length terms in the open market. If the legislation also requires a market valuation of the land, that valuation would be based on a hypothetical open market sale between a willing buyer and willing seller, and the land valuation would be stated without VAT.

Why this can be difficult in practice

Valuation questions are often fact-sensitive. The official guidance gives the core definition, but applying it can still be difficult.

One difficulty is that market value is hypothetical. The actual deal may include special features, personal motivations, linked arrangements, or unusual bargaining positions. Those features may not reflect what the open market would produce.

Another difficulty is non-cash consideration. Services, works, or other benefits may not have a single obvious price. The correct figure is not simply whatever the parties say it is worth. The guidance points to an arm’s length open market cost, which may require evidence.

VAT can also cause confusion. In everyday transactions people often think in VAT-inclusive amounts. But the guidance says market value itself excludes VAT, because the valuation assumes a hypothetical transaction rather than reproducing the actual VAT treatment of the real deal.

Finally, there is the practical question of evidence. The guidance does not say that every case needs a formal surveyor’s report, but it does say that an acceptable valuation may require input from someone with professional qualifications. The more significant or unusual the valuation issue, the more important proper evidence is likely to be.

Key takeaways

• For LBTT purposes, market value means the price reasonably expected on an open market sale between a willing buyer and willing seller.
• If consideration includes services or other non-cash items, you need their arm’s length open market value, not just the parties’ own estimate.
• Market value excludes VAT, and the buyer is responsible for providing any valuation needed to support the LBTT treatment.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guidance on Determining Market Value for Land and Buildings Transactions

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