Guide on Non-Chargeable Costs in Property Transactions and Tax Obligations

SDLT exclusions from chargeable consideration

For SDLT, some payments or liabilities linked to a property transaction do not count as chargeable consideration, so they should not increase the SDLT due. These are specific exceptions and commonly arise in gifts, transfers on death, lease transactions, compulsory purchase cases and some agricultural tenancy situations.

• Certain compulsory purchase costs and compensation, especially disturbance payments and other amounts not directly based on land value, are excluded.
• Inheritance tax paid or assumed on a transfer by gift, will or intestacy is not treated as chargeable consideration.
• Capital gains tax paid or assumed on a gift or other non-arm’s-length transfer may be excluded, but not if there is any other chargeable consideration.
• A tenant’s payment of the landlord’s reasonable costs on the grant, extension or enfranchisement of a lease is not chargeable consideration.
• An agricultural tenant’s duty to give up Single Farm Payment entitlement to the landlord at the end of the tenancy is also excluded.
• Care is needed because similar payments can be treated differently if they are really part of the price rather than a specific excluded cost.

Scroll down for the full analysis.

SDLT: costs and liabilities that are not treated as chargeable consideration

This page explains a narrow but important SDLT point: some amounts paid by a buyer or tenant may look like part of the price, but the official rules say they are not treated as chargeable consideration. That matters because SDLT is charged by reference to chargeable consideration. If a payment falls outside that concept, it should not increase the SDLT calculation.

What this rule is about

In SDLT, the starting question is usually: what is being given for the land transaction? That is broader than just the purchase price. In some cases, if the buyer pays something on the seller’s behalf, that payment can count as chargeable consideration.

But the source material identifies a group of costs and liabilities that are treated differently. These are specific exclusions. The point is not that they are never economically relevant. It is that, for SDLT purposes, they are not counted as chargeable consideration in the situations covered by the rules.

This is especially relevant where a transfer happens by gift, under a will or intestacy, on lease grant or extension, or in specialist contexts such as compulsory purchase and agricultural tenancies.

What the official source says

The HMRC manual says that although some costs paid by the purchaser on the seller’s behalf can be chargeable consideration, the following are not treated as chargeable consideration:

• certain costs and compensation under compulsory purchase legislation, including costs under section 23 of the Compulsory Purchase Act 1965 and compensation for disturbance and other matters not directly based on land value under section 5(6) of the Land Compensation Act 1961;
• a liability or agreement to pay inheritance tax where property is transferred as a gift or under a will or intestacy;
• a liability or agreement to pay capital gains tax where property is transferred as a gift, or in other circumstances that are not a bargain made at arm’s length, subject to an important limit: this exclusion does not apply if there is any other chargeable consideration;
• a tenant’s payment of the landlord’s reasonable costs on the grant, extension or enfranchisement of a lease;
• an agricultural tenant’s obligation to surrender entitlement to the Single Farm Payment to the landlord on termination of the tenancy.

The manual presents these as specific exceptions to the general idea that payments or obligations undertaken by the buyer may count towards consideration.

What this means in practice

The practical effect is that not every financial burden connected with a land transaction increases the SDLT bill.

For example, if someone receives land by gift and also takes on an inheritance tax liability connected with that transfer, the manual says that liability is not chargeable consideration. Likewise, in a qualifying non-arm’s-length gift situation, a capital gains tax liability or agreement to pay it may also be ignored for SDLT purposes.

For lease transactions, the rule on landlord’s costs is particularly important. On the grant, extension or enfranchisement of a lease, tenants often pay the landlord’s legal or other reasonable professional costs. The source says those reasonable costs are not chargeable consideration. So they should not simply be added to the premium or rent for SDLT purposes.

In compulsory purchase cases, some statutory costs and compensation payments are also outside chargeable consideration. The source is careful to identify compensation for disturbance and other matters not directly based on land value. That wording matters. It suggests a distinction between amounts reflecting the value of the land itself and other statutory compensation items.

The capital gains tax point needs particular care. The manual says the exclusion applies where the transfer is by gift or in other non-arm’s-length circumstances, but it then adds that the exclusion does not apply if there is any other chargeable consideration. In practice, that means a transaction that is otherwise entirely gratuitous may be treated differently from one where there is some separate consideration elsewhere in the arrangement.

How to analyse it

A sensible way to approach this issue is to ask the following questions.

• What is the land transaction and what is the basic consideration? Is it a sale, a gift, a transfer on death, a lease grant, a lease extension, enfranchisement, or a compulsory purchase situation?
• What payment, liability or obligation is being looked at? Is it part of the price for the land, or is it a separate statutory or transactional cost?
• Does the source material identify that specific item as excluded from chargeable consideration?
• If the item is capital gains tax, is the transfer by gift or otherwise not at arm’s length?
• If the item is capital gains tax, is there any other chargeable consideration in the transaction? If there is, the manual says the exclusion does not apply.
• If the item is the landlord’s costs, are they the landlord’s reasonable costs, and are they being paid on the grant, extension or enfranchisement of a lease?
• If the case involves compulsory purchase compensation, is the amount one of the statutory items identified by the source, especially compensation not directly based on land value?

This exercise matters because similar-looking payments can be treated differently. The source itself contrasts excluded costs with other costs paid on the seller’s behalf, such as a seller’s legal costs, which may be chargeable consideration.

Example

Illustration: a tenant pays a premium for a lease extension and also reimburses the landlord’s reasonable legal and valuation costs for dealing with that extension. On the basis of the source material, the premium may form part of chargeable consideration, but the landlord’s reasonable costs paid by the tenant are not treated as chargeable consideration.

Illustration: a parent transfers land to an adult child as a gift, and the child agrees to bear a capital gains tax liability arising in connection with the transfer. If the transfer is genuinely a gift or otherwise not at arm’s length, and there is no other chargeable consideration, the source says that liability or agreement is not chargeable consideration. But if there is some other chargeable consideration, the position on the capital gains tax exclusion changes.

Why this can be difficult in practice

The main difficulty is classification. A payment can be connected with a land transaction without being part of the SDLT consideration. But the boundaries are not always obvious.

One fact-sensitive area is whether an amount is really an excluded cost or instead part of what the buyer is giving for the land. The source gives examples of excluded items, but it does not say that every tax, cost or reimbursement falls outside chargeable consideration.

The capital gains tax rule is also easy to misread. The exclusion is not stated as universal. It is tied to gifts or other transfers that are not bargains at arm’s length, and the manual expressly says the exclusion does not apply if there is any other chargeable consideration. That means mixed transactions need careful analysis.

Another practical difficulty is the reference to the landlord’s reasonable costs. Reasonableness may matter. The source does not suggest that any amount labelled as costs automatically falls outside chargeable consideration.

In compulsory purchase cases, the statutory basis of the payment matters. The source distinguishes amounts such as disturbance compensation and other matters not directly based on land value. That indicates that not all compensation in a compulsory purchase context should automatically be treated the same way.

Key takeaways

• Some payments connected with a land transaction are specifically excluded from chargeable consideration for SDLT.
• Important examples include certain inheritance tax and capital gains tax liabilities, reasonable landlord’s costs on certain lease transactions, and some compulsory purchase compensation items.
• The exact nature of the payment and the surrounding facts matter, especially where there is any other chargeable consideration or where the payment may really form part of the price.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guide on Non-Chargeable Costs in Property Transactions and Tax Obligations

View all HMRC SDLT Guidance Pages Here