The chargeable consideration rules below regarding the carrying out of works are subject to the rule involving arrangements with certain public or education bodies – see LBTT2015.
Where the whole or part of the consideration for a land transaction consists of the carrying out of works of construction, improvement or repair of a building or other works to enhance the value of land, then:
- to the extent that all of the conditions specified below are met, the value of the works does not count as chargeable consideration; and
- to the extent that those conditions are not met, the value of the works is to be taken into account as chargeable consideration.
The conditions are:
- that the works are carried out after the effective date of the transaction;
- that the works are carried out on land acquired or to be acquired under the transaction (‘land acquired or to be acquired’ means the acquisition of a major interest in the land); and
- that it is not a condition of the transaction that the works are carried out by the seller or a person connected with the seller.
The value of the works is to be calculated as the amount that would have to be paid in the open market for the carrying out of the works in question.
Where a contract has initially been substantially performed without completion and then subsequently completed by conveyance (see LBTT1005), there may be two notifiable transactions - the first being the contract or agreement and the second being the transaction effected on completion or, as the case may be, the grant or execution of the lease. Where this applies, the first condition above is treated as met in relation to the second transaction if it is met in relation to the first.
Consideration will be given to contracts which include a contract for both the sale of land and a contract for building services to decide if this constitutes the sale of land with completed buildings. If it is concluded that the contracts constitute the sale of land with completed buildings, the chargeable consideration will be the total consideration for both. Generally, unless the purchase and development contracts are so intertwined that the failure of one will prevent the completion of the other or renders the other invalid, LBTT should be calculated only on the consideration attributable to the land transferred with apportionment carried out on a just and reasonable basis.