Buyer Indemnity for Ongoing Land Liabilities Not Chargeable Consideration

LTT and Buyer Indemnities for Ongoing Land Liabilities

For Land Transaction Tax, a buyer’s promise to indemnify a seller against ongoing liabilities linked to the land will usually not count as chargeable consideration. This means the indemnity itself, and payments made under it before, on, or after the effective date, do not normally increase the amount on which LTT is calculated, provided it is a genuine indemnity for continuing property-related obligations rather than part of the purchase price.

• A buyer indemnity for ongoing liabilities connected with the land, including lease covenants, is generally not chargeable consideration for LTT.
• Payments made under that indemnity are also generally ignored for LTT, whether they are made before, at, or after the effective date.
• The key question is substance: the obligation must be a genuine indemnity for continuing land-related liabilities, not simply part of the price dressed up as an indemnity.
• Lease assignments are a common example, where the buyer indemnifies the seller against future tenant covenant liabilities.
• Care is needed in drafting and analysis, because not every clause labelled an indemnity will automatically fall outside chargeable consideration.

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LTT and buyer indemnities for ongoing liabilities on land

This page explains a narrow but important point in Land Transaction Tax: when a buyer agrees to indemnify the seller for ongoing liabilities connected with the land, that indemnity is not treated as chargeable consideration. In simple terms, the indemnity itself does not usually increase the amount on which LTT is calculated.

What this rule is about

When land is transferred, the seller may want protection against liabilities that could arise after completion. A common example is where the land is subject to ongoing obligations, such as lease covenants or other liabilities linked to the property, and the buyer agrees to reimburse or protect the seller if those liabilities fall on the seller.

The tax question is whether that promise by the buyer, or payments made under it, count as consideration for the land transaction. If they did, they could increase the taxable amount for LTT.

What the official source says

The official material states that where the buyer gives the seller an indemnity for ongoing liabilities relating to the land, including lease covenants:

• the buyer’s agreement to give that indemnity is not chargeable consideration,
• payments made under that indemnity before the effective date are not chargeable consideration,
• payments made at the effective date are not chargeable consideration, and
• payments made after the effective date are not chargeable consideration.

This treatment is stated to apply where the indemnity relates to ongoing liabilities in relation to the land.

What this means in practice

If the buyer simply agrees to stand behind the seller in respect of continuing property-related obligations, that promise does not itself add to the LTT consideration.

This matters because sale documents often include wide indemnity wording. Without this rule, there could be an argument that the buyer is giving something of value in return for the property. The official position here is that, for this type of indemnity, that is not how LTT is calculated.

The point also applies to actual payments under the indemnity. If the buyer later reimburses the seller for a liability covered by the indemnity, that payment is not treated as additional chargeable consideration for the original land transaction.

The source specifically mentions lease covenants. So, for example, if a buyer of a leasehold interest agrees to indemnify the seller against future breaches of tenant obligations or other continuing lease liabilities, that indemnity is not counted as consideration merely because it exists or because money is later paid under it.

How to analyse it

A sensible way to approach this issue is to ask the following questions:

• Is there an indemnity from the buyer to the seller?
• Does it relate to ongoing liabilities or obligations connected with the land?
• Is it the type of continuing property-related liability contemplated by the rule, such as lease covenants?
• Are the payments being looked at made under that indemnity, rather than being part of the price or some separate payment obligation?

If the answer to those questions is yes, the source indicates that neither the indemnity nor payments under it are chargeable consideration.

The practical distinction is between:

• a genuine indemnity for ongoing land-related liabilities, and
• a payment that is really part of the bargain for the transfer.

The source deals with the first category. It does not say that every payment described as an indemnity is automatically ignored for LTT. The label used in the contract is less important than the real function of the obligation.

Example

Illustration: A assigns a lease to B. Under the assignment, B agrees to indemnify A against future liabilities arising under the tenant covenants in the lease. Two years later, the landlord pursues A for a breach that falls within the indemnity, and B reimburses A.

On the basis of the official material, B’s promise to indemnify A is not chargeable consideration for the lease assignment. The later reimbursement payment is also not chargeable consideration for that land transaction.

Why this can be difficult in practice

The main difficulty is characterisation. Some contractual obligations are clearly indemnities for continuing liabilities attached to the land. Others may be framed as indemnities but in substance operate as part of the price paid for the property or as an adjustment to the commercial bargain.

The source is brief and does not set out a detailed test for drawing that line. So the facts and the drafting matter. In practice, it is important to identify exactly what liability is being indemnified, why it arises, and whether the payment is truly contingent on that liability rather than being an agreed part of the transfer value.

Another point is scope. The source refers to ongoing liabilities “in relation to the land”, including lease covenants. That suggests a connection with continuing property obligations. It does not invite a broad assumption that any indemnity in transaction documents falls outside chargeable consideration.

Key takeaways

• A buyer’s indemnity to the seller for ongoing land-related liabilities is not, by itself, chargeable consideration for LTT.
• Payments made under that indemnity are also not chargeable consideration, whether made before, at, or after the effective date.
• The critical issue is whether the obligation is a genuine indemnity for ongoing liabilities connected with the land, rather than part of the purchase price in another form.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Buyer Indemnity for Ongoing Land Liabilities Not Chargeable Consideration

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