LBTT2007 - Deemed market value where transaction involves connected company

LBTT guidance on the chargeable consideration in a land transaction involving a connected company or connected companies.

LBTT2007 - Deemed market value where transaction involves connected company

In most cases LBTT is calculated on the actual consideration paid on a land transaction rather than the deemed market value. However, where the buyer in a land transaction is a company and the seller is connected to the buyer, the chargeable consideration for the transaction will be not less than the market value (see LBTT2016) of the property at the effective date or, if the transaction involves the grant of a lease, then the chargeable consideration is to be taken as not less than the rent. The tax calculation may therefore be based on a value greater than the consideration (if any) actually being paid.

The same rule about the chargeable consideration applies where a seller (individual or company) transfers property to a buyer (company) and some or all of the consideration for that transfer consists of the issue or transfer of shares in a company with which the seller is connected.

The general rule that transactions with no chargeable consideration are exempt for LBTT (see LBTT3003) does not apply to land transactions falling within this rule. But transactions are still subject to any other applicable provision affording exemption or relief from LBTT.


LBTT(S)A 2013 section 22

Section 1122 of the Corporation Tax Act 2010 applies to determine whether the seller is ‘connected’ to the buyer. Shares include stocks and the reference to shares in a company includes a reference to securities issued by a company.

LBTT(S)A 2013 section 58

There are three exceptions to the deemed market value rules for connected companies. The rules do not apply where:

  • immediately after the transaction the company (the buyer) holds the property as a trustee in the course of the business of the management of trusts;
  • immediately after the transaction the company (the buyer) holds the property as trustee and the seller is only connected with the company by virtue of section 1122 of the Corporation Tax Act 2010; or
  • (a) the seller is a company;

(b) the transaction is, or is part of, a distribution of assets (whether or not on the winding up of the company); and


(c) within the last three years, the subject matter of the land transaction, or an interest from which that interest is derived, has not also been the subject of a transaction about which the seller has made a claim for LBTT group relief.


If any of these exceptions apply, LBTT will be charged on the actual consideration paid.

A worked example on deemed market value where the land transaction involves a connected company is provided separately on our website under LBTT Worked Examples.

LBTT(S)A 2013 section 23

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