Land and Buildings Transaction Tax (Scotland) Act 2013 section Schedule 2 paragraph 16

Capital gains tax paid by the buyer on non-arm's length transactions

Schedule 2 paragraph 16 deals with situations where a buyer acquires a chargeable interest other than at arm's length (or between connected persons) and also becomes liable for the seller's capital gains tax on the disposal — it provides that the buyer's payment of that capital gains tax is not treated as chargeable consideration for LBTT purposes, but only if there is no other chargeable consideration for the transaction.

• Where a chargeable interest is acquired otherwise than at arm's length, or between connected persons under section 18 of the Taxation of Chargeable Gains Act 1992, special rules apply to any capital gains tax the buyer pays.
• If the buyer becomes liable for, or actually pays, the capital gains tax arising on the seller's disposal of the chargeable interest, that payment or liability is excluded from the chargeable consideration for the LBTT transaction.
• This exclusion only applies where there is no other chargeable consideration for the transaction — if there is any separate chargeable consideration aside from the capital gains tax payment, this relief does not apply.
• The practical effect is to prevent the buyer's assumption of the seller's capital gains tax liability from artificially inflating the LBTT charge on what would otherwise be a transaction with no consideration.