Jurisdiction(s):
United Kingdom

Key definition

Liabilities definition

What does Liabilities mean? In practice, a scheme’s liabilities are what it owes: the future benefit payments (for example, pensions and lump sums) and the scheme’s expenses. They are usually measured as the present value of expected cashflows, determined by an actuary using assumptions on discount rate, longevity, inflation and expenses. Comparing liabilities with the market value of assets gives the funding level: a deficit arises where liabilities exceed assets; a surplus where assets exceed liabilities. “Liabilities” is a descriptive term used across legal, actuarial and accounting contexts rather than a single statutory definition. However, valuation bases are prescribed for particular purposes. In...

UK VAT on overage in land transactions: treatment, tax points, option to tax/disapplication, new freehold building rules, anti-avoidance and subsequent dealings

Published by a LexisNexis Tax expert

Practice notes

This Practice Note explores the VAT consequences of overage payments. Why is this important? In simple terms, where the underlying sale attracting the overage was taxable for VAT, the overage will itself carry VAT, ordinarily becoming chargeable only when the overage is actually paid; however, there are significant exceptions.

Accordingly, sellers may encounter unforeseen liabilities, and at unexpected points in time, so sale contracts must reflect the correct VAT position. Moreover, HMRC offers no comment in guidance, and there have been instances of it misunderstanding overage arrangements, or their VAT analysis, leading it to dispute a position even where VAT has been correctly accounted for. It is therefore prudent to record, at the time, the rationale for the approach adopted, together with any professional advice obtained.

What is overage?

Overage refers to a scenario in which a seller—often, though not exclusively, of land—retains a right to receive from the purchaser a further amount of consideration after completion and after any initial price has been paid...

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Martin Scammell

Martin Scammell is an independent VAT consultant, specialising in property and construction matters, who works with tax departments in major corporates and universities, and with a number of law and accountancy firms. He is the author of the leading reference work on VAT and property.Martin started out in VAT Policy in Customs & Excise, was a Partner at Ernst & Young, where he headed up the VAT real estate group, and then became head of indirect tax at Eversheds.He has been involved in the development of VAT legislation and policy over many years, and regularly serves on working parties established by HMRC. He was a member of the Office of Tax Simplification’s consultative committee for their review of VAT in 2017, and in 2018-19 of HMRC’s external stakeholder group considering the proposed reverse charge for building work. Martin currently works with HMRC as...

Web page updated on 22/05/2026

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