A developer purchases land for an initial consideration of £350,000. The buyer and seller agree additional consideration of £50,000 is due for each set of 50 houses for which planning permission is granted within the 2 years of the effective date of the transaction. The buyer expects to obtain permission for 200 houses.
The contingent consideration in the transaction is £200,000 (4 x £50,000) which is contingent on planning permission for 200 houses being granted. This can remain contingent for a period of 2 years. Therefore, each deferral condition is satisfied.
LBTT is due on the initial consideration of £350,000 even if a deferral application is approved. The normal rules apply to the initial consideration which is not contingent (i.e. it is certain). An LBTT return and payment of tax is required no later than 30 days after the effective date of the transaction.
The buyer obtains planning permission for 200 houses 1 year after the effective date of the transaction. As a result, the buyer must make a further LBTT return within 30 days of the consideration ceasing to be contingent.
Non-Contingent (i.e. certain) Consideration - £350,000
Contingent Consideration - £200,000
Total Consideration (Non-Contingent + Contingent Consideration) = £550,000
Tax on Total Consideration (calculated using the relevant tax rates and bands for non-residential transactions in force at the effective date of the transaction) - £16,000
LBTT on Non-Contingent Consideration
(Certain Consideration / Total Consideration) x Tax on Total Consideration
(350,000 / 550,000) x 16,000 = £10,182
LBTT on Contingent Consideration
(Contingent Consideration / Total Consideration) x Tax on Total Consideration
(200,000 / 550,000) x 16,000 = £5,818