Guide on Non-Cash Consideration for Land Transactions Involving Construction Works

When building, improvement or repair works count for SDLT

For SDLT, works a buyer agrees to carry out are not always treated as part of the price for land. They are usually ignored if they are done after the transaction’s effective date, on land the buyer is acquiring or already holds, and the seller is not required to do the works on the buyer’s behalf. If these conditions are not all met, the works can count as chargeable consideration and must be valued at open market value.

• SDLT consideration can include non-cash value, not just money paid for the land.
• Construction, improvement or repair works may be excluded if they are carried out after the effective date of the transaction.
• The exclusion only applies if the works are on the acquired land or on other land held by the buyer or a connected person.
• If the deal requires the seller to carry out the works on the buyer’s behalf, the exclusion does not apply.
• Where the exclusion fails, the works are treated as SDLT consideration at their open market value, not simply their cost.
• These rules often need careful review in development deals, especially where substantial performance happens before completion.

Scroll down for the full analysis.

When construction, improvement or repair works count as SDLT consideration

This page explains a specific SDLT rule about non-cash consideration. Sometimes the buyer of land agrees not only to pay money, but also to carry out building, improvement or repair works. The key question is whether those works are part of the chargeable consideration for SDLT. The answer matters because if the works do count as consideration, their value can increase the amount on which SDLT is charged.

What this rule is about

SDLT is charged on chargeable consideration given for a land transaction. Consideration is not limited to cash. It can include something else of value given by the buyer in return for the land.

One recurring issue is where the buyer agrees to carry out works, such as constructing a building, improving property, or repairing a structure. Those works may benefit the seller, a connected person, or the wider bargain. The legislation draws a line between works that are simply things the buyer does after acquiring the land, and works that are really part of what the buyer is giving in exchange for the transaction.

What the official source says

The HMRC manual summarises paragraph 10 of Schedule 4 to Finance Act 2003. It says that construction, improvement or repair works are not chargeable consideration if all of the following conditions are met:

• the works are carried out after the effective date of the transaction under which the land is acquired, or to be acquired, by the purchaser
• the works are to be carried out on land acquired, or to be acquired, under that transaction, or on other land held by the purchaser or a person connected with the purchaser
• it is not a condition of the transaction that the vendor carries out the works on the purchaser’s behalf

If those conditions are not met, the works represent chargeable consideration, valued on an open market value basis.

The manual also deals with the special SDLT timing rule in section 44(8) Finance Act 2003, where a return may be needed both on substantial performance and later on completion. In that situation, if the first condition above is met at the first notification point, it is treated as met again at the second notification point.

What this means in practice

The practical effect is that post-acquisition works carried out by the buyer will often be ignored for SDLT, but only within the limits of the rule.

The most important distinction is between:

• works the buyer carries out after the effective date on land it is acquiring or already holds, which may fall outside chargeable consideration, and
• works that form part of the bargain for the acquisition, in which case they can be treated as consideration and brought into the SDLT calculation at open market value.

This means that simply labelling works as “separate” will not settle the SDLT position. You need to look at when the works are carried out, where they are carried out, and whether the seller is in substance requiring them as part of the deal.

The rule is particularly relevant in development transactions, regeneration deals, conditional land contracts, and arrangements where a buyer agrees to improve retained land or neighbouring land.

How to analyse it

A sensible way to analyse the point is to ask the following questions.

• What exactly has the buyer agreed to do? Identify whether the obligation is to construct, improve, or repair a building or other structure.
• When are the works to be carried out? The legislation looks at whether they are carried out after the effective date of the land transaction.
• Where will the works be done? The rule only excludes works carried out on land acquired under the transaction, or other land held by the buyer or a connected person.
• Who is actually doing the works? If it is a condition of the transaction that the seller carries them out on the buyer’s behalf, the exclusion does not apply.
• Are the works really part of the price? If the statutory conditions are not satisfied, the works are treated as consideration and must be valued at open market value rather than cost alone.

It is also worth separating two different questions that can easily be confused:

• whether the works are excluded from chargeable consideration under this specific rule
• if not excluded, how their value is measured for SDLT purposes

The manual states that in the non-exempt cases, the amount brought in is the open market value of the works.

Example

Illustration: a buyer acquires a site and, under the commercial understanding between the parties, intends to build on it after completion. If the works are carried out after the effective date, on the acquired land, and the contract does not require the seller to carry them out on the buyer’s behalf, the works may fall outside chargeable consideration under this rule.

By contrast, if the arrangement is structured so that the buyer’s obligation to carry out works is part of what the seller is receiving under the deal, and the statutory conditions are not all met, the value of those works can count as SDLT consideration. In that case, the relevant amount is their open market value.

Why this can be difficult in practice

The difficulty is that development and construction obligations are often embedded in wider commercial arrangements. A contract may not say in simple terms that the works are “consideration”, but the overall bargain may still need careful analysis.

Several points can be fact-sensitive:

• the effective date may not be the same as formal completion if there has been substantial performance
• the land on which the works are carried out may need close checking, especially where neighbouring land, retained land, or connected-party land is involved
• the seller’s role may matter if the seller is to procure or carry out the works on the buyer’s behalf
• valuation can be contentious where the works do count as consideration, because the test is open market value

The section 44 point can also be easy to miss. In transactions notified both on substantial performance and on completion, the legislation preserves the first condition if it was satisfied at the first notification stage. That prevents the timing rule from producing an artificial change in result purely because a second return is later required.

Key takeaways

• Buyer-funded construction, improvement or repair works are not automatically part of SDLT consideration.
• They are excluded only if the statutory conditions are met, especially the timing, location, and seller-involvement conditions.
• If the exclusion does not apply, the works count as consideration at their open market value.

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-Cash Consideration for Land Transactions Involving Construction Works

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