Non-Chargeable Consideration: Obligations, Agreements, and Payments in LTTA

LBTT items that are not treated as chargeable consideration

For Scottish LBTT, not every payment, promise or obligation linked to a land transaction is taxable. Some items are specifically excluded from chargeable consideration under Schedule 4, paragraphs 14 to 18 of the Land and Buildings Transaction Tax (Scotland) Act 2013, so they should be left out of the LBTT calculation if they fall within those rules.

• LBTT is charged on chargeable consideration, so it is important to separate the actual price for the land from other connected payments or obligations.
• A payment or promise does not become taxable just because it appears in the same deal or contract as the property transfer.
• The key test is whether the item is truly part of the consideration for the land transaction or is excluded by Schedule 4, paragraphs 14 to 18.
• Labels used in the contract are not conclusive; the legal and practical substance of the arrangement matters.
• A sensible approach is to list everything the buyer or tenant is giving, identify side arrangements, and then check each item against the statutory exclusions before calculating LBTT.

Scroll down for the full analysis.

LBTT: obligations, agreements and payments that are not treated as chargeable consideration

This page explains a narrow but important point in Land and Buildings Transaction Tax (LBTT): not everything connected with a land transaction counts as chargeable consideration. Schedule 4 to the Land and Buildings Transaction Tax (Scotland) Act 2013 sets out certain obligations, agreements and payments that are excluded. This matters because LBTT is charged by reference to chargeable consideration, so identifying what is excluded can affect the tax calculation.

What this rule is about

When land is bought, leased or otherwise transferred, the parties may agree to many different things. Some of those things are part of the price for the land. Others may be side arrangements, separate obligations, or payments that the legislation says should not be brought into the LBTT calculation.

The legal issue is therefore not simply whether money changes hands. The real question is whether a particular obligation, agreement or payment falls within the statutory meaning of chargeable consideration, or whether it is specifically excluded by the legislation.

The source material points to Schedule 4, paragraphs 14 to 18 of the relevant Act as the provisions dealing with these exclusions.

What the official source says

The official material states that the legislation on obligations, agreements and payments that are not chargeable consideration is found in Schedule 4, paragraphs 14 to 18. In other words, those paragraphs contain the statutory rules for deciding that certain items, although connected with the transaction, are not to be treated as chargeable consideration for LBTT purposes.

The source itself does not set out the detailed wording of those paragraphs. Its main function is to direct the reader to the relevant legislative provisions.

What this means in practice

In practice, this means you should not assume that every payment or promise linked to a property transaction increases the LBTT bill. The starting point is to identify everything the buyer is giving, promising, assuming or paying in connection with the transaction. The next step is to test whether any part of that falls within one of the statutory exclusions in Schedule 4, paragraphs 14 to 18.

If an item is within one of those exclusions, it is not chargeable consideration. That means it should not be included when calculating the amount on which LBTT is charged.

This can be important where transaction documents include:

• additional contractual promises beyond the transfer of the property itself
• payments made for reasons connected with the deal but not properly part of the price for the land transaction
• arrangements under which one party agrees to do something, but the legislation treats that obligation as outside chargeable consideration

The practical consequence is that the tax analysis must focus on the statutory treatment of each item, not just on commercial labels used in the contract.

How to analyse it

A sensible approach is to work through the transaction in stages.

• Identify the land transaction being taxed.
• List everything the buyer, tenant or other acquiring party is providing in connection with it.
• Separate direct price for the land from other payments, undertakings or side arrangements.
• Check whether any of those items are dealt with by Schedule 4, paragraphs 14 to 18.
• Only include amounts or obligations in the LBTT calculation if they remain chargeable consideration after applying those exclusions.

Questions worth asking include:

• Is this item really part of the price for the land transaction?
• Is it a separate obligation or payment that the legislation excludes?
• Does the contract describe it one way, but its real substance suggest something different?
• Is the item connected with the transfer of land, or is it consideration for something else?

This is an area where the statutory wording matters. The answer depends on the terms of the legislation, not on broad impressions of fairness or commercial common sense alone.

Example

Illustration: a buyer agrees to pay a stated purchase price for a property and also enters into another obligation under the same wider deal. The first question is whether that additional obligation forms part of the chargeable consideration for the land transaction. The fact that it appears in the same deal does not automatically mean it is taxable for LBTT. You would need to check whether Schedule 4, paragraphs 14 to 18 exclude it from chargeable consideration.

If the legislation excludes that obligation, only the taxable consideration is brought into the LBTT computation. If it is not excluded, it may still need to be counted.

Why this can be difficult in practice

The source material is brief and simply points to the legislation. That means the difficult work lies in applying the statutory wording to the facts.

Several points can make this difficult:

• Transaction documents may bundle together land price, separate services, reimbursements, indemnities and other obligations.
• The parties’ labels are not always decisive. A payment described as something separate may still be part of the consideration for the land, or vice versa.
• Some obligations may have economic value without obviously being a cash payment, which makes classification harder.
• The correct analysis may depend on the precise drafting of the contract and on what the parties are really giving in return for the transfer.

So although the principle sounds simple, the application can be fact-sensitive. The legislation must be read closely.

Key takeaways

• For LBTT, not every obligation, agreement or payment linked to a land deal is automatically chargeable consideration.
• The relevant exclusions are in Schedule 4, paragraphs 14 to 18 of the legislation identified by the source.
• The practical task is to identify each item connected with the transaction and test it against the statutory exclusions before calculating LBTT.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Non-Chargeable Consideration: Obligations, Agreements, and Payments in LTTA

View all WRA LTT Guidance Pages Here