LBTT Exemption for Land Transactions with No Chargeable Consideration

LBTT on Property Gifts with No Chargeable Consideration

A transfer of Scottish property can be exempt from LBTT if it is a genuine gift and the buyer gives nothing of monetary value in return. However, the exemption does not apply just because the transfer is called a gift. If the buyer takes on a mortgage or other debt, or if certain company connection rules apply, there may still be chargeable consideration and LBTT may be due.

• LBTT is normally based on chargeable consideration, which includes cash and anything else with monetary value.
• A true gift with no payment, no debt assumed, and nothing else given in return is exempt from LBTT.
• If the buyer takes over an existing mortgage or other debt, that debt can count as chargeable consideration.
• The name given to the transaction does not decide the tax position; the legal and financial substance does.
• Special care is needed where the buyer is a company, because the exemption may not apply if the seller is connected with it or if connected shares form part of the consideration.

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LBTT on gifts of property: when there is no chargeable consideration

This page explains when a land transaction is exempt from Land and Buildings Transaction Tax because nothing of monetary value is given in return. The basic idea is simple: if property is genuinely given away and the buyer gives nothing for it, there is no chargeable consideration and the transaction is exempt. The difficulty is that a transaction can still count as having consideration even where no cash is paid, especially if the buyer takes on an existing mortgage or other debt.

What this rule is about

LBTT is normally charged by reference to the chargeable consideration given for a land transaction. Chargeable consideration is not limited to cash. It includes money or anything else with monetary value.

This rule deals with the opposite situation: where there is no chargeable consideration at all. A common example is a pure gift of land or buildings. If the buyer gives nothing in return, the transaction is exempt from LBTT.

The rule matters because people often assume that a transfer described as a “gift” is automatically outside LBTT. That is not always right. The tax result depends on what the buyer gives, undertakes, or assumes as part of the transaction.

What the official source says

The official guidance says that a land transaction is exempt from LBTT where there is no chargeable consideration. This covers cases where land or buildings are gifted, or ownership is transferred, and no money or money’s worth changes hands.

The guidance also makes clear that if the buyer assumes existing debt, that assumed debt is chargeable consideration for LBTT purposes. The example given is where the property is transferred subject to a mortgage and the buyer takes on liability for that mortgage.

There is also an important exception to the exemption. The exemption does not apply where the buyer is a company and either:

• the seller is connected with the buyer, or
• some or all of the consideration consists of the issue or transfer of shares in a company with which the seller is connected.

The source cited is schedule 1 paragraph 1 of the Land and Buildings Transaction Tax (Scotland) Act 2013, with related guidance on assumed debt and connected company cases.

What this means in practice

If a property is transferred for nothing, and the buyer does not take on any mortgage or other debt, the transaction is exempt from LBTT.

But if the buyer takes the property subject to a debt, that debt can itself be chargeable consideration. In practice, this means that a transfer described informally as a gift may still give rise to LBTT if there is borrowing secured on the property and the buyer assumes responsibility for it.

This is a practical point for family transfers, separation arrangements, and transfers into trusts or companies. The label used by the parties is less important than the legal and financial substance of the transaction.

The connected-company exception is another trap. Even if no cash is paid, the exemption may be switched off where the buyer is a company and the seller is connected with it, or where shares connected with the seller form part of the consideration. That means transfers into companies need separate care and cannot be treated as straightforward gifts simply because no money changes hands.

How to analyse it

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

• Is anything being given by the buyer in return for the property?
• If no cash is paid, is there still money’s worth being provided?
• Is the buyer taking on an existing mortgage or other debt secured on, or linked to, the property?
• Is the buyer a company?
• If the buyer is a company, is the seller connected with it?
• Does any part of the consideration involve shares in a company connected with the seller?

If the answer to the first three questions is genuinely no, the exemption for no chargeable consideration is likely to be in point. If debt is assumed, that debt needs to be considered as chargeable consideration. If a company is involved on the buyer side, the connected-company exception must be checked before concluding that the exemption applies.

Example

Illustration: A parent transfers a Scottish house to an adult child. No price is paid. If the property is mortgage-free and the child gives nothing in return, the transfer is exempt because there is no chargeable consideration.

Now change the facts slightly. The house is still described as a gift, but it is subject to an existing mortgage and the child takes over responsibility for that mortgage. In that case, the assumed debt is chargeable consideration for LBTT purposes. The transaction is no longer simply a no-consideration gift.

Why this can be difficult in practice

The main difficulty is that “gift” is not a tax test. People use the word loosely, but LBTT looks at whether there is consideration in substance.

Debt assumption is the clearest example. A transfer can feel like a gift because no cash price is paid, yet still involve chargeable consideration because the buyer takes on a financial burden.

Company cases can also be difficult. The guidance points to special rules where the buyer is a company and there is a connection with the seller, or where shares are involved. In those situations, the simple no-consideration exemption may not be available even though the transaction does not look like an ordinary sale.

The result can therefore turn on the detailed legal structure of the transfer, not just on how the parties describe it.

Key takeaways

• A genuine gift of land with nothing given in return is exempt from LBTT because there is no chargeable consideration.
• If the buyer assumes a mortgage or other debt, that assumed debt can be chargeable consideration.
• The exemption does not apply in certain connected-company situations, so transfers to companies need separate analysis.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: LBTT Exemption for Land Transactions with No Chargeable Consideration

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