Where the chargeable consideration for a land transaction consists in whole or in part of either:
- the satisfaction or release of a debt due to the buyer or owed by the seller; or
- the assumption of existing debt by the buyer,
then the chargeable consideration for the transaction is the amount (or, as the case may be, part of the amount) of debt satisfied, released or assumed. The amount that is chargeable consideration cannot exceed the market value (see LBTT2016) of the subject-matter of the transaction.
In addition to the above rule, but only in a case involving the assumption of existing debt by the buyer, where:
- the debt assumed is or includes debt secured on the property forming the subject-matter of the transaction; and
- immediately before the transaction there were two or more persons each holding an undivided share of that property (or there were two or more such persons immediately after the transaction),
then the amount of secured debt assumed is to be determined as if the amount of that debt owed by each of those persons at a given time were the proportion of it corresponding to the person’s undivided share of the property at that time. This means, for example, that a buyer acquiring only a part share of the property (and accepting joint and several liability for any existing debt) will not be chargeable to the full amount of the debt assumed.
- a debt is secured on the subject-matter of a land transaction immediately before and immediately after the transaction; and
- the rights or liabilities in relation to that debt of any party to the transaction are changed as a result of or in connection with the transaction,
then for the purposes of this rule there is an assumption of that debt by the buyer, and that assumption of debt constitutes chargeable consideration for the transaction.
The amount that is chargeable consideration cannot exceed the market value of the subject-matter of the transaction.
In this page of guidance:
- ‘debt’ means an obligation, whether certain or contingent, to pay a sum of money either immediately or at a future date;
- ‘existing debt’, in relation to a transaction, means debt created or arising before the effective date of, and otherwise than in connection with, the transaction; and
- references to the amount of a debt are to the principal amount payable or, as the case may be, the total of the principal amounts payable, together with the amount of any interest that has accrued due on or before the effective date of the transaction.