Guidance on Determining Market Value for Land and Buildings Transactions

LBTT market value: what it means and when it matters

For LBTT, market value is sometimes used instead of the actual price paid. It means the price that land, buildings, or non-cash consideration would reasonably fetch on the open market between a willing buyer and seller. Buyers must make sure any valuation used is properly supported, and VAT is not included in the market value of land and buildings.

• LBTT is usually based on what the buyer gives for the property, but some transactions require an open market value instead.
• Market value is an objective test, not simply the figure the parties agree privately in their contract.
• If consideration includes services or other non-cash items, they are valued by what they would cost on arm’s length open market terms.
• The market value of land and buildings for LBTT purposes does not include VAT, even if VAT is charged on the transfer.
• The buyer is responsible for providing and supporting any valuation used in the LBTT return, and Revenue Scotland may check it.
• In harder cases, such as unusual properties or complex apportionments, comparable evidence or a professional valuation may be needed.

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LBTT market value: what it means and when it matters

This page explains how market value is worked out for Land and Buildings Transaction Tax (LBTT) when the tax rules require you to use a market value figure instead of, or alongside, the price actually paid. This matters because LBTT is charged by reference to chargeable consideration, and in some cases that consideration must be measured by market value rather than by the cash changing hands.

What this rule is about

In many land transactions, the starting point for LBTT is the amount the buyer gives for the property. Often that is a cash price. But not every transaction is a simple cash purchase. Sometimes consideration is given in a non-cash form, such as services or some other benefit. In some situations, the legislation requires a market value figure to be used.

The core idea is that market value is not the same as whatever the parties happen to agree between themselves. It is a hypothetical open market figure. The question is what price the land, buildings, or other consideration might reasonably be expected to fetch in a sale between a willing buyer and a willing seller on the open market.

What the official source says

The Revenue Scotland guidance says that the market value of land or buildings is the price that might reasonably be expected to be obtained in an open market sale 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.

The guidance also points to section 62 of the Land and Buildings Transaction Tax (Scotland) Act 2013 and to schedule 2 paragraph 12 of that Act.

Where consideration for a land transaction is provided by 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 at arm’s length on the open market.

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

Finally, the guidance makes clear that if a transaction requires a valuation, it is the buyer’s responsibility to provide it. Revenue Scotland does not obtain or prepare valuations for the buyer, although it may use professional valuers to check valuations or apportionments.

What this means in practice

The practical point is that you may need to value either:

• the land or buildings being transferred, or
• the non-cash consideration being given for them.

The answer will not depend simply on the contract wording or on what the parties subjectively think the property is worth. The valuation must reflect an objective open market standard.

If the consideration includes services, the relevant question is not what those services actually cost the buyer to provide, or what value the parties privately place on them. The guidance points instead to what those services would reasonably cost if purchased at arm’s length on the open market.

The VAT point is also important. If you are working out market value for LBTT purposes, the guidance says that VAT is left out of that market value figure. That is so even where VAT is in fact chargeable on the transfer.

Because the buyer is responsible for the valuation, the buyer needs to be able to support the figure used in the LBTT return if it is later checked. In straightforward cases, the value may be obvious from market evidence. In less straightforward cases, a professional valuation may be needed.

How to analyse it

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

• Does the LBTT rule for this transaction require market value to be used at all, or is actual consideration enough?
• What exactly needs to be valued: the land, the buildings, the services, or some other non-cash consideration?
• What would a willing buyer and willing seller agree in an open market transaction?
• If the consideration is non-monetary, what would that consideration reasonably cost if bought at arm’s length on the open market?
• Have you excluded VAT from the market value of the land and buildings?
• What evidence supports the figure used, such as comparable sales, market data, or a professional valuation?
• If there is an apportionment, is there a clear and supportable basis for it?

This framework matters because LBTT can turn on valuation evidence. A figure that is unsupported, inconsistent, or based only on the parties’ private agreement may be open to challenge.

Example

Illustration: a buyer acquires land in exchange partly for cash and partly for construction services to be provided to the seller. For LBTT purposes, the services are not ignored just because no money is paid for them. Their value must be measured by asking what those services would reasonably cost if the seller bought them on arm’s length terms in the open market. If the transaction also requires a market value of the land itself, that valuation would be based on a hypothetical open market sale between a willing buyer and willing seller, excluding VAT.

Why this can be difficult in practice

Valuation is often fact-sensitive. The open market test sounds simple, but applying it can be difficult where the property is unusual, where there are few comparable transactions, or where the consideration includes bespoke services or other benefits that are not commonly bought and sold in a standard way.

Another difficulty is that the guidance states the general meaning of market value, but whether market value must be used in a particular transaction depends on the relevant LBTT legislation for that situation. So there are really two separate questions:

• does the law require a market value figure here, and
• if so, what is the correct market value?

There can also be disputes about apportionments. If different elements of a transaction need to be split between chargeable and non-chargeable items, or between different assets, the buyer should expect Revenue Scotland to examine whether the apportionment is reasonable.

The guidance also indicates that professional input may be needed. That does not mean a professional valuation is mandatory in every case, but it does reflect the risk that an unsupported figure may not be accepted.

Key takeaways

• For LBTT, market value means the price reasonably expected in an open market sale between a willing buyer and willing seller.
• Non-cash consideration, such as services, is valued by reference to what it would cost on arm’s length open market terms.
• The buyer is responsible for providing any valuation needed, and the market value of land and buildings is taken without VAT.

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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