Land and Buildings Transaction Tax (Scotland) Act 2013 Schedule 2 paragraph 14

Indemnity given by buyer to seller

Schedule 2 paragraph 14 provides that where a buyer agrees to indemnify the seller against third-party liabilities connected with the land, neither the indemnity agreement nor any payments under it count as chargeable consideration for LBTT purposes.

• When a buyer takes on responsibility to cover the seller's existing liability to a third party relating to the land, this is known as an indemnity.
• The liability must arise from the seller's breach of an obligation owed to a third party in connection with the land being transferred.
• Neither the indemnity agreement itself nor any actual payments made under it are treated as chargeable consideration for LBTT.
• This means such indemnities do not increase the amount on which LBTT is calculated, keeping the tax charge based on the true purchase price of the land.