Application to defer payment

Worked example for LBTT4016 Application to defer payment in case of contingent or uncertain consideration.

Example:

The consideration in a land transaction consists of an initial payment of £350,000 for land and a later payment of £50,000 for each set of 50 houses for which planning permission is granted.

The buyer expects to get permission for 200 houses. The amount of:

  • non-contingent consideration in the transaction is the initial £350,000 payment which happens irrespective of whether any planning permission is granted; and
  • contingent consideration in the transaction is the £200,000 payment (4 x £50,000) which is contingent on planning permission for the 200 houses being granted.

The buyer makes a successful application for deferral on the £200,000 contingent consideration.

The normal rules apply to the initial £350,000 consideration which is not contingent – a LBTT return and payment of tax is required to be made no later than 30 days after the effective date of the transaction.

The tax that is due on the £350,000 non-contingent consideration =

(350,000/550,000) X the total tax chargeable on £550,000 (calculated using the relevant tax rates and bands that are in force at the effective date of the transaction – the £550,000 is the sum of the contingent and non-contingent considerations).

If planning permission is later granted on the 200 homes, the tax that then becomes due and payable = (200,000/550,000) X the total tax chargeable on a consideration of £550,000 (calculated using the relevant tax rates and bands that were in force at the effective date of the transaction).

For further information about applications to defer payment please see our Guidance.

Last updated: 
15 February 2015
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