Understanding Market Value in LTTA: VAT and Taxation of Chargeable Gains Act 199

How market value is worked out for Land Transaction Tax purposes

For Land Transaction Tax in Wales, the amount used for tax is not always the price actually paid. Where the legislation refers to market value, it uses the same legal approach as the Taxation of Chargeable Gains Act 1992, and some rules also require VAT to be included in the consideration.

• Market value for LTTA purposes follows the rules in the Taxation of Chargeable Gains Act 1992, especially sections 272 to 274.
• If a provision requires market value, you should use an objective open-market figure, not just the contract price or what the parties think is fair.
• This can matter in cases such as connected-party deals, non-cash consideration, or where undervaluation could reduce tax.
• VAT is a separate point from market value, but some LTT provisions say it must be included as part of the consideration.
• When working out LTT, check whether the rule uses actual consideration, market value, or both, and make sure the return uses the legally correct figure.

Scroll down for the full analysis.

How market value is worked out for LTTA purposes

This page explains what “market value” means in the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) framework, and why that matters. The source material is brief, but the point is important because some LTT rules use market value instead of, or alongside, the actual price paid for land. The official position is that market value is worked out using the same approach as under the Taxation of Chargeable Gains Act 1992, especially sections 272 to 274 of that Act. The source also notes that, in some provisions, VAT must be included as part of the consideration.

What this rule is about

In many land tax situations, the starting point is the actual consideration given for the transaction, usually the price. But some rules need a different measure. They ask what the land would fetch on the open market, rather than what the parties actually agreed between themselves.

That matters where the agreed price may not reflect a true arm’s length value. Examples can include connected-party transactions, transactions involving non-cash consideration, or provisions designed to prevent undervaluation from reducing tax.

The source material does not set out every circumstance in which market value is used. Its main point is narrower: when the LTTA Act refers to market value, the meaning is aligned with the capital gains tax legislation rather than being separately defined from scratch.

What the official source says

The official material says that, for the purposes of the LTTA Act, market value is determined in the same way as for the purposes of the Taxation of Chargeable Gains Act 1992, in particular sections 272 to 274 of that Act.

In practical terms, this means the valuation concept is borrowed from that legislation. The source also adds an important qualification: some provisions require VAT to be included as part of the consideration.

So there are two separate points to keep in mind:

• when a rule asks for “market value”, the valuation method follows the Taxation of Chargeable Gains Act approach; and
• where a provision says VAT is part of the consideration, it must be taken into account rather than ignored.

What this means in practice

If an LTT provision requires you to use market value, you should not assume this means whatever figure the parties consider fair, or whatever appears in the contract. The relevant question is the statutory market value under the adopted valuation rules.

That usually points to an objective open-market test rather than the parties’ own bargain. In other words, the exercise is to identify the value that the property interest would have on the statutory basis, not simply to record the amount actually paid.

The VAT point is also easy to miss. In some contexts, people instinctively think of a property price net of VAT, especially where VAT is recoverable by a business. But if the relevant LTT provision requires VAT to be included as part of the consideration, it forms part of the amount used for tax purposes even if, commercially, the buyer expects to reclaim it.

This can affect the amount chargeable to tax and may alter the tax result where thresholds, bands, or valuation-based rules are engaged.

How to analyse it

A sensible way to approach the issue is:

• First, identify whether the LTT provision you are applying uses actual consideration, market value, or both.
• Second, if market value is required, apply the statutory concept adopted from the Taxation of Chargeable Gains Act 1992 rather than an informal or purely commercial estimate.
• Third, check whether the specific provision says VAT must be included as part of the consideration.
• Fourth, keep separate in your mind the valuation question and the VAT question. They are related to the tax calculation, but they are not the same issue.
• Finally, make sure the figure used for the return matches the legal basis required by the provision, not just the headline contract price.

The key question is not simply “what was paid?” but “what amount does the legislation require to be brought into account for this type of transaction?”

Example

Illustration: suppose land is transferred for a stated price that does not reflect a full open-market bargain, and the relevant LTT rule requires market value to be used. In that case, the tax analysis would not stop at the contract price. You would need to determine market value using the statutory approach imported from the Taxation of Chargeable Gains Act 1992.

If the same provision, or another applicable provision, also requires VAT to be included as part of the consideration, then the amount used for LTT purposes may need to include VAT as well. The correct figure therefore depends on the exact rule being applied.

Why this can be difficult in practice

The source material is short and does not explain the detailed content of sections 272 to 274 of the Taxation of Chargeable Gains Act 1992. That means the practical difficulty is often not spotting that “market value” is relevant, but applying the imported valuation rules correctly.

Another difficulty is that readers may treat VAT as a separate accounting issue rather than part of the tax base for land transaction purposes. The source makes clear that this is not always right. Some provisions specifically require VAT to be included, so the answer depends on the wording of the provision in point.

There is also a risk of conflating three different figures:

• the contract price actually paid;
• the statutory market value; and
• the consideration figure after any required VAT inclusion.

Those figures may be the same in some transactions, but they need not be.

Key takeaways

• For LTTA purposes, market value follows the approach used in the Taxation of Chargeable Gains Act 1992, especially sections 272 to 274.
• If a provision requires market value, the actual price agreed is not necessarily the figure that matters.
• Some provisions require VAT to be included as part of the consideration, so VAT should not automatically be ignored.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding Market Value in LTTA: VAT and Taxation of Chargeable Gains Act 199

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