Guidance on Deferring LBTT Payment for Contingent or Uncertain Consideration

LBTT deferral for contingent or uncertain purchase price

A buyer may ask Revenue Scotland to defer paying part of the LBTT where some of the purchase price is contingent or uncertain at the effective date, such as overage payable only if a future event happens. The full consideration must still be included in the LBTT calculation, but payment of the tax linked to the uncertain part may be postponed if the legal conditions are met.

• Deferral may be available only if the consideration is genuinely contingent or uncertain, is not rent, and may become payable more than 6 months after the effective date.
• The initial LBTT return must still show the full chargeable consideration, including both the fixed and contingent amounts.
• LBTT is calculated on the total consideration first, then the total tax is apportioned between the amount payable now and the amount that may be deferred.
• The buyer must apply using Revenue Scotland’s deferral form and provide full details; missing information can lead to refusal.
• If deferral is granted, the buyer must still file the initial return on time, and must file a further return and pay the deferred tax within 30 days after the amount becomes certain or the contingency ends.
• Deferral is not available if the amount is already ascertainable, is due within 6 months, or if Revenue Scotland considers the arrangement to involve artificial tax avoidance.

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LBTT deferral where part of the price is contingent or uncertain

This page explains when a buyer can ask Revenue Scotland to defer paying part of Land and Buildings Transaction Tax (LBTT) because some of the purchase price is not yet fixed or depends on a future event. The point matters because LBTT is normally calculated by reference to the whole chargeable consideration, but in some cases the law allows payment of part of that tax to be deferred until the uncertain or contingent amount becomes certain.

What this rule is about

Some land transactions include a price that is not fully settled on the effective date. A common example is overage: an extra amount becomes payable only if planning permission is granted, development milestones are reached, or another future event happens.

In those cases, the buyer may know that extra consideration may become payable, but not whether it will in fact be payable, when it will be payable, or exactly how much it will be. Section 41 of the Land and Buildings Transaction Tax (Scotland) Act 2013, together with the administration regulations, allows a buyer to apply to defer payment of the LBTT attributable to that part of the consideration in limited cases.

This is a payment deferral, not a rule that removes the amount from the tax calculation altogether. That distinction is important.

What the official source says

Revenue Scotland says a buyer may apply to defer all or part of the LBTT payable where:

• the tax depends on chargeable consideration that is contingent or uncertain at the effective date, and
• that amount becomes payable, or may become payable, more than 6 months after the effective date.

A deferral is not available:

• for rent,
• if the contingent or uncertain amount is payable within 6 months of the effective date, or
• if the consideration is ascertainable.

The application must be made using Revenue Scotland’s deferral application form and must include detailed information about the transaction, the certain and uncertain elements of the consideration, the total chargeable consideration, the tax calculation, the amount sought to be deferred, and the nature and timing of the contingency or uncertainty.

Revenue Scotland may ask for more information. If the information is not provided, it may refuse the application.

If the application is accepted, Revenue Scotland will issue a notice setting out the amount payable with the initial return and the relevant future event or events. A “relevant event” is an event on which all or part of the deferred consideration either stops being contingent or becomes certain.

The buyer must still file an LBTT return even if deferral is granted. A further return is then required when the deferred amount becomes due and payable. That further return must be filed within 30 days of the event becoming certain or known, and the tax must be paid at the same time.

Revenue Scotland also says that the initial return should include the full total chargeable consideration, including both the certain and contingent elements. The tax liability is calculated using that total consideration. The amount paid on each return is then determined by apportioning that total tax liability between the certain and deferred parts.

The guidance also notes practical system issues in the SETS filing system and explains that manual adjustments may be needed to show only the amount currently payable in the “total tax payable” field.

What this means in practice

The key practical point is that the buyer does not calculate LBTT separately on the fixed part and the contingent part as if they were two separate transactions. Instead, the buyer starts by calculating LBTT on the total chargeable consideration for the whole transaction, including the contingent or uncertain amount.

That total tax is then split on an apportioned basis between:

• the tax payable now on the certain consideration, and
• the tax that may be deferred on the contingent or uncertain consideration.

This matters because LBTT works by reference to tax bands and rates. If the buyer were to calculate tax separately on each part, the result could be too low. Revenue Scotland expressly warns against that approach.

Deferral also does not remove the need to file on time. The buyer must still submit the initial return within the normal filing deadline and pay the amount that is due immediately. If the deferred amount later becomes certain, a further return and payment are required within 30 days.

If Revenue Scotland refuses the application, it must notify the buyer of the grounds and the amount of tax due. The refusal notice is treated as an assessment, and interest runs from the date of the notice until payment.

The guidance also says Revenue Scotland may refuse a deferral application if the transaction involves artificial tax avoidance arrangements within Part 5 of the Revenue Scotland and Tax Powers Act 2014.

How to analyse it

A sensible way to analyse a possible deferral claim is to work through the following questions.

1. Is there really contingent or uncertain consideration?

You need to identify whether part of the price depends on a future event or cannot yet be ascertained. If the amount is already ascertainable, deferral is not available even if payment happens later.

2. Does that amount fall due more than 6 months after the effective date?

If the amount becomes payable within 6 months of the effective date, Revenue Scotland says deferral is not available.

3. Is the amount something other than rent?

The guidance excludes rent from the deferral regime.

4. What is the total chargeable consideration?

The return must include both the certain and contingent elements in the total chargeable consideration. This is the starting point for the overall LBTT calculation.

5. How much tax is attributable to the certain part and how much to the deferred part?

Use the total tax on the full consideration, then apportion that total tax by reference to the ratio between each part of the consideration and the total consideration. That is the method shown in Revenue Scotland’s example.

6. Has the deferral application been properly completed?

The application must contain the required information, including a reasoned view on when the amount may cease to be contingent or become ascertainable. Missing or incorrect information can lead to refusal.

7. What happens when the future event occurs?

You need a process for monitoring the relevant event. Once the amount becomes certain or the contingency ends, a further return is required within 30 days, with payment of the deferred tax.

8. Does the return correctly reflect the deferral?

According to Revenue Scotland’s guidance, the deferral reference number must be included on the return and on any future return for the transaction. If the original return was already filed, it must be amended to include that reference.

Example

This is an illustration based on Revenue Scotland’s example.

A developer buys land for £350,000. The contract also provides for an additional £50,000 for each block of 50 houses for which planning permission is granted within 2 years. The buyer expects permission for 200 houses, so the contingent consideration is £200,000. Total consideration is therefore £550,000.

On the effective date:

• certain consideration: £350,000
• contingent consideration: £200,000
• total consideration: £550,000

Using the rates in force at the effective date for the example transaction, the LBTT on the full £550,000 is £16,000.

That total tax is then apportioned:

• tax attributable to the certain consideration: (350,000 / 550,000) × 16,000 = £10,182
• tax attributable to the contingent consideration: (200,000 / 550,000) × 16,000 = £5,818

The initial return still shows the total consideration of £550,000, but the amount actually paid at that stage is £10,182, assuming Revenue Scotland has accepted the deferral application.

If planning permission is later granted for the 200 houses, the buyer must file a further return within 30 days of the consideration ceasing to be contingent. That further return reflects the deferred amount becoming due, and the £5,818 is then payable.

Why this can be difficult in practice

The main difficulty is distinguishing between:

• consideration that is genuinely contingent,
• consideration that is uncertain in amount, and
• consideration that is already ascertainable, even if it will be paid later.

Those categories can overlap in commercial drafting, especially in overage clauses and deferred payment provisions. The contractual wording matters.

Another practical difficulty is that the initial return must include the full total consideration, while the amount actually payable at that stage may be lower because of the deferral. Revenue Scotland’s guidance acknowledges system issues and says manual amendments may be needed. That means the filing process may not be intuitive even where the legal position is clear.

There is also a timing risk. A buyer must identify when the relevant event occurs and file the further return within 30 days. In some transactions, it may not be obvious exactly when a contingency ends or when an amount becomes ascertainable.

Finally, Revenue Scotland may refuse an application if it considers the arrangement artificial tax avoidance. The guidance does not set out a detailed test on this page, so where that issue may arise the wider anti-avoidance rules need to be considered carefully.

Key takeaways

• LBTT deferral may be available where part of the consideration is contingent or uncertain and may become payable more than 6 months after the effective date.
• The initial LBTT calculation is still based on the total chargeable consideration, including the contingent element.
• If deferral is granted, the buyer still files the initial return and later files a further return within 30 days when the deferred amount becomes certain or payable.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guidance on Deferring LBTT Payment for Contingent or Uncertain Consideration

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