Linked transactions are explained in more detail in LBTT2008.
Where a chargeable transaction is one of a number of linked transactions, the amount of tax for all of the linked transactions is first calculated using the appropriate rates and bands as if the linked transactions were a single transaction. The tax payable for an individual transaction is then reached by multiplying the total tax payable on all the linked transactions by the fraction individual consideration/total consideration.
The mechanism for calculating the tax is:
- Step 1 - Add the consideration for each transaction to give the total consideration;
- Step 2 - Multiply so much of the total consideration that falls within each band by the appropriate tax rate and add those up to give the total tax chargeable;
- Step 3 - Divide the consideration for the individual transaction by the total consideration to arrive at a fraction; and
- Step 4 - Multiply the total tax chargeable by the fraction reached in step 3. The result is the amount of tax chargeable on the individual transaction.
Worked Example
Yellow agrees to buy three plots of land from Pink. Yellow buys them in three different transactions on the same day, so the three transactions are linked.
The consideration given for each plot is:
Plot 1: £100,000
Plot 2: £200,000
Plot 3: £300,000
The total chargeable consideration in this example would be £600,000.
Using the rates and bands for non-residential property transactions the total tax chargeable would be:
| Consideration | Rate | LBTT Amount |
|---|---|---|
| Up to £150,000 | 0% | Nil |
| £150,001 to £250,000 = £100,000 | 1% | £1000 |
| £250,001 to £600,000 = £350,000 | 5% | £17,500 |
| Total LBTT | £18,500 |
The next step is to calculate the tax payable for each individual plot.
This is calculated as each individual plot divided by the total consideration for all of the linked transactions multiplied by the total LBTT payable.
The calculation would be as follows:
| Transaction | Consideration / Linked Consideration x Total LBTT | LBTT |
|---|---|---|
| Plot 1 = £100,000 | (£100,000/ £600,000) x £18,500 | £3,083 |
| Plot 2 = £200,000 | (£200,000/ £600,000) x £18,500 | £6,166 |
| Plot 3 = £300,000 | (£300,000/ £600,000) x £18,500 | £9,250 |
| Total LBTT | £18499* |
*There may be a slight difference due to decimal rounding.
Ref ID
LBTT4014
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