Understanding Stamp Duty on Contingent Consideration: Example with P Ltd and V Ltd

SDLT on Contingent Purchase Price and When a Repayment May Be Claimed

When part of a property purchase price depends on a future event, SDLT is usually worked out at the start using the full possible price, including the contingent amount. If that extra amount later never becomes payable, the buyer may be able to claim back the SDLT paid on it, and HMRC’s example says interest may also be due.

• Contingent consideration includes extra payments that only arise if something happens later, such as planning permission being granted under an overage clause.
• For SDLT, the contingent amount can be included in the chargeable consideration from completion, even if it is uncertain whether it will ever be paid.
• If no application is made to defer SDLT on the contingent element, the buyer may have to pay SDLT up front on the maximum contract price.
• If the trigger event does not happen and the extra amount is never payable, a repayment claim may be made for the SDLT charged on that amount.
• The timing of any repayment depends on when it becomes clear under the contract that the contingency has finally failed and no further payment can arise.
• In practice, careful review of the sale agreement is needed, especially where trigger periods can be extended or the payment might still become due in another way.

Scroll down for the full analysis.

SDLT and contingent purchase price: reclaiming tax if the extra amount never becomes payable

This page explains what happens for SDLT when part of the purchase price is contingent, uncertain or not yet fixed at the time of completion, and that amount later turns out not to be payable. The key point is that SDLT is generally charged up front on the maximum consideration in the contract, but a later repayment claim may be possible if the contingent amount never becomes due.

What this rule is about

Some land transactions include an extra payment that only becomes due if a future event happens. A common example is an overage clause, where the buyer pays more if planning permission is obtained.

For SDLT, this creates a timing problem. At the effective date of the transaction, the future amount may be uncertain or conditional. Even so, the SDLT rules can require that contingent consideration is brought into account immediately.

The source material deals with what happens later if that contingent amount is never actually payable. It refers to an adjustment mechanism under Finance Act 2003, section 80.

What the official source says

The official example describes a buyer, P Ltd, buying land for £10 million plus a further £5 million if it obtains planning permission within five years to build an industrial park.

HMRC’s example says the chargeable consideration for SDLT is £15 million. In other words, the fixed amount and the contingent amount are both included at the outset.

The example then assumes the buyer does not apply to defer payment of tax under Finance Act 2003, section 90. Instead, it pays SDLT on the full £15 million.

If five years pass and planning permission is not obtained, the extra £5 million is not payable. HMRC says that at that point the buyer can claim a repayment of SDLT attributable to that £5 million. The example also states that interest would be payable on that amount.

What this means in practice

The practical effect is that contingent consideration is not ignored simply because it may never become due. Unless a deferral mechanism is used, the buyer may have to fund SDLT on the full possible price at the start.

If the contingency later fails, the buyer is not necessarily stuck with that SDLT cost. A repayment claim may be available once it becomes clear that the amount will never be payable.

This matters particularly in development and promotion transactions, where overage or planning-linked payments can be large. The SDLT cost may be paid years before anyone knows whether the trigger event will happen.

The source material also highlights an important distinction between two separate ideas:

• how much consideration is treated as chargeable at the start; and
• whether payment of SDLT on the contingent element is deferred.

In the example, the contingent amount is still part of the chargeable consideration, but the buyer chose not to seek deferral of the SDLT that related to it.

How to analyse it

When looking at a transaction of this kind, it helps to work through the issue in stages.

First, identify whether any part of the price is contingent, uncertain or unascertained. Ask whether the buyer must pay more only if a future event happens, or whether the amount cannot yet be fixed.

Second, identify the amount that is treated as chargeable consideration at the effective date. The source example shows that a contingent amount can be included in full from the outset.

Third, check whether any application has been made to defer payment of SDLT on the contingent element under the separate statutory mechanism referred to by HMRC. The example specifically assumes no such application was made.

Fourth, monitor the contingency over time. If the relevant event does not happen within the agreed period, and the extra amount therefore never becomes payable, that may create the basis for a repayment claim.

Fifth, identify when the position becomes final. In HMRC’s example, that is at the end of the five-year planning period, when it is known that the condition has failed.

Example

Illustration: a company buys land for £10 million, with a further £5 million payable only if planning permission is obtained within five years. It completes the purchase and pays SDLT on £15 million, because no deferral application is made.

If planning permission is obtained within the five years, the contingent amount becomes payable and there is no overpayment on that part.

If planning permission is not obtained within the five years, the £5 million never becomes payable. On the basis of the HMRC example, the buyer can then claim repayment of the SDLT paid on that £5 million, and interest would also be payable.

Why this can be difficult in practice

The legal idea is simple, but the facts can be less clear.

One difficulty is deciding whether the future payment has truly ceased to be payable, or whether it remains possible under the contract. That depends on the wording of the sale agreement. If the trigger period can be extended, or if the payment obligation can arise in another way, the position may not yet be final.

Another difficulty is distinguishing between a contingent amount and an amount that is merely uncertain in quantum. The source page groups these concepts together, but the contractual analysis still matters.

There is also a procedural point. The example assumes no deferral application under section 90. In real transactions, advisers will often consider whether deferral is available and appropriate, because that affects cash flow even if the eventual tax outcome may later be corrected by repayment.

Finally, the repayment claim only becomes relevant once it is established that the amount is not payable. Until then, the original SDLT treatment remains in place.

Key takeaways

• A contingent part of the purchase price can be included in chargeable consideration for SDLT from the outset.
• If SDLT is paid on that amount and the contingency later fails, a repayment claim may be made for the SDLT on the amount that never became payable.
• The contract terms and the point at which the contingency is finally resolved are critical to working out whether and when a repayment is due.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding Stamp Duty on Contingent Consideration: Example with P Ltd and V Ltd

View all HMRC SDLT Guidance Pages Here