A gives a £500,000 home to B, in exchange for B’s £300,000 flat. B must pay LBTT on £500,000 (the market value of the interest acquired – this is greater than the consideration B gave).
A must pay LBTT on the greater of the market value of the interest acquired (£300,000) and the chargeable consideration given. As A has given a £500,000 property in exchange for the property acquired, the consideration is £500,000. So, A also pays LBTT on £500,000.
As this is a purely commercial transaction, there is no element of gift. (But see example 3 below.)
A and B decide to exchange their homes. They agree that A’s home is valued at £375,000 and B’s home is valued at £400,000. They further agree that A will pay £25,000 to B as well. A pays tax on the chargeable consideration of £400,000 since this is both the value of the interest A acquires and the amount of consideration A gives to acquire it. The chargeable consideration is £375,000 for B's acquisition - this is equal to both the value of the interest B acquired and the amount of apportioned consideration B gave to acquire it.
A’s LBTT return is based on £400,000 whilst B’s is £375,000.
A, who is B’s mother, gives a £500,000 home to B, in exchange for B’s £300,000 flat. B must pay LBTT on £500,000 (the market value of the interest acquired – this is greater than the consideration B gave).
The consideration A gave was £500,000 but this must be apportioned on a just and reasonable basis between the chargeable consideration given for the flat and the element of gift to B. The just and reasonable apportionment results in the chargeable consideration given being £300,000 and a gift of £200,000. So A pays LBTT on £300,000.