Guidance on LBTT Exemptions When Conditions Are Partially Unmet

LBTT where an inheritance exemption fails because some consideration is given

Some LBTT exemptions for property passing from a deceased person’s estate can be lost if the person receiving the property gives consideration. However, even if the exemption no longer applies, Scottish LBTT rules can still leave out certain amounts or acts when working out the chargeable consideration, which may reduce the tax due.

• This rule applies to certain estate transactions that would normally be exempt, including assents or appropriations by personal representatives and some variations of testamentary dispositions.
• If the exemption fails because consideration is given, you must still check whether part of that consideration is excluded from the LBTT calculation under schedule 2 paragraph 9 of the LBTT(S)A 2013.
• For paragraph 6 cases, secured debt taken on by the person acquiring the property is ignored if that debt was already secured on the property immediately after the deceased’s death.
• For paragraph 7 cases, where one disposition is varied in return for another variation, that other variation is not treated as chargeable consideration.
• In practice, it is important to separate the fact that the exemption has failed from the separate question of how much consideration is actually chargeable to LBTT.
• Care is needed in mixed arrangements involving mortgages, balancing payments, refinancing or deed variations, because only some elements may be excluded.

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LBTT: what happens if an inheritance-related exemption almost applies, but some consideration is given

This page explains a narrow but important LBTT rule. It deals with transactions connected with a deceased person’s estate that would normally be exempt, but where the exemption is lost because the person receiving the property gives some consideration. In those cases, not everything that might look like consideration is counted for LBTT. That can reduce the taxable amount.

What this rule is about

Under the Land and Buildings Transaction Tax (Scotland) Act 2013, some transactions involving a deceased person’s estate are exempt from LBTT. Two relevant examples are:

• an assent or appropriation by a personal representative, and
• certain variations of testamentary dispositions.

Those exemptions depend on conditions being met. One important condition is that the person acquiring the property must not give consideration, except in the limited way allowed by the legislation.

The source material addresses what happens if that condition is not fully met. The transaction may stop being exempt, but the legislation still limits what counts as chargeable consideration.

What the official source says

The official guidance refers to schedule 2 paragraph 9 of the LBTT(S)A 2013.

It says that where a transaction would otherwise be exempt under paragraph 6 of schedule 1, but the exemption fails because the person acquiring the property gives consideration, the chargeable consideration does not include any secured debt that the person assumes, provided that the debt was secured on the property immediately after the deceased’s death.

It also says that where a transaction would otherwise be exempt under paragraph 7 of schedule 1, but the exemption fails because consideration is given, the chargeable consideration does not include the making of any variation of another disposition.

In short, the exemption may be lost, but the legislation still excludes certain amounts or acts from the chargeable consideration.

What this means in practice

This rule matters where property passes out of an estate and something is given in return.

Normally, if an exempt inheritance-related transaction involves consideration, that can bring the transaction into charge. But the taxable amount is not automatically everything of value connected with the arrangement.

For assents and appropriations by personal representatives, the key point is this: if the person taking the property also takes on a mortgage or other secured debt already attached to the property, that assumed debt is left out of the chargeable consideration, as long as the debt was secured on the property immediately after death.

For variations of testamentary dispositions, if the arrangement involves one disposition being varied in return for another variation, the making of that other variation is not counted as chargeable consideration.

This can make a real difference. A transaction may be taxable because the exemption conditions are not fully met, but the amount on which LBTT is charged may still be much lower than expected.

How to analyse it

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

• Is this the kind of transaction that would normally fall within the inheritance-related exemptions in schedule 1 paragraph 6 or paragraph 7?
• Why does the exemption fail? Is it because the person acquiring the property has given consideration?
• If so, what exactly is that consideration?
• Does part of it fall within the statutory exclusions mentioned in schedule 2 paragraph 9?
• For paragraph 6 cases, was the debt secured on the property immediately after the deceased’s death?
• For paragraph 7 cases, is the alleged consideration simply the making of another variation of a disposition?

The practical task is to separate:

• consideration that causes the exemption to fail, from
• amounts or acts that the legislation says should still be ignored when calculating chargeable consideration.

That distinction is easy to miss if you look only at whether the exemption applies and do not then move on to the separate question of how much consideration is actually chargeable.

Example

Illustration: A personal representative transfers a house from an estate to a beneficiary. The house is subject to a mortgage that was already secured on it immediately after the deceased died. The beneficiary also gives some additional payment as part of the arrangement.

If the additional payment means the exemption is no longer available, the transaction may still be chargeable to LBTT. But the amount of the existing secured debt taken on by the beneficiary is not included in the chargeable consideration under this rule. The analysis therefore focuses on the other consideration given, not on that secured debt.

A similar point can arise where beneficiaries rearrange who receives what under a will. If one variation is made in return for another, that reciprocal variation is not itself counted as chargeable consideration for this purpose.

Why this can be difficult in practice

The main difficulty is identifying what counts as consideration and what does not.

In estate situations, parties often describe arrangements informally, and several things may happen at once: a transfer of property, assumption of debt, balancing payments between beneficiaries, or a deed varying dispositions under a will. The legal effect of each step matters.

Another difficulty is that the source material is limited. It gives the result for these specific cases, but not a full worked method for mixed arrangements. If there is more than one form of consideration, you need to identify which elements are excluded by schedule 2 paragraph 9 and which are not.

The timing point for secured debt is also important. The exclusion applies to debt secured on the property immediately after death. That wording may matter if borrowing is refinanced, replaced, or created later.

Finally, this is a good example of why exemption analysis and consideration analysis are separate questions. A transaction can fail an exemption condition and still benefit from a rule that narrows the chargeable consideration.

Key takeaways

• If an inheritance-related LBTT exemption fails because consideration is given, that does not mean every connected payment or liability is chargeable.
• In paragraph 6 cases, secured debt assumed by the acquirer is ignored if it was secured on the property immediately after death.
• In paragraph 7 cases, the making of another variation of a disposition is not included in chargeable consideration.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guidance on LBTT Exemptions When Conditions Are Partially Unmet

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