Understanding SDLT on Non-Cash Consideration in Construction Contracts: Two Examples

SDLT and building works as part of the price for land

When buying land, SDLT is charged on the full consideration given for the transaction, which can include more than just cash. Building works may count as part of the price if they are something the buyer is providing to the seller in return for the land, but works required on the land being bought will not always increase the SDLT charge.

• SDLT can apply to non-cash consideration, including works or services, if they form part of the bargain for the land.
• If the buyer pays cash and also agrees to build something for the seller on the seller’s separate land, the value of those works is likely to be added to the SDLT consideration.
• If the buyer must carry out works on the land being acquired after completion, those works do not automatically count as consideration for SDLT.
• The key question is what the seller is really receiving in exchange for the sale, not simply whether the contract imposes a development obligation.
• Useful points to check are what the buyer has promised, who benefits from the works, where the works will be done, and whether they are part of the price or just a condition of development.
• Borderline cases can be difficult, especially where works benefit both the seller and the development, or where the contract does not clearly separate the cash price from the works obligation.

Scroll down for the full analysis.

SDLT and building works as consideration: when construction obligations increase the price

This page explains how Stamp Duty Land Tax (SDLT) treats a land purchase where the buyer must also carry out building or similar works. The key point is that construction work can sometimes count as part of the price paid for the land, but not always. The result depends on what the buyer is really giving the seller in return for the land.

What this rule is about

SDLT is charged on the chargeable consideration for a land transaction. That does not only mean cash. It can also include non-cash consideration, such as works, services, or other things of value given as part of the bargain for the land.

The source material deals with construction or similar works. In practice, the question is whether the buyer’s obligation to carry out works is part of what the seller is receiving for selling the land. If it is, the value of those works is added to the SDLT consideration. If it is not, the works do not increase the SDLT charge.

What the official source says

The official examples draw a distinction between two situations.

In the first example, the buyer agrees to pay £1 million for land and also to build a workshop for the seller on the seller’s separate land nearby. The construction cost is £750,000. The official view is that the SDLT consideration is £1.75 million. That is because the workshop is something the buyer is providing to the seller as part of the deal for the land.

In the second example, the buyer agrees to pay £5 million to a council for land. As a condition of the sale, the buyer must construct a leisure centre for the council on part of the land after completion. The value of the works is £1 million. The official view is that the SDLT consideration remains £5 million. The works are not added.

The contrast shows that not every development obligation imposed on a buyer counts as consideration for SDLT purposes.

What this means in practice

The practical issue is whether the works are being provided to the seller as part of the price for the land, or whether they are simply an obligation affecting how the acquired land must be developed or used.

Where the buyer must build something for the seller on land the seller already owns, that looks like the seller is receiving an additional benefit in return for the sale. In that case, the value of the works is likely to be non-cash consideration.

By contrast, where the buyer must carry out works on the land being acquired after completion, that does not automatically mean the works are consideration. In the example given, even though the council required a leisure centre to be built, the SDLT consideration was still only the cash purchase price.

This matters because the SDLT return must reflect the full chargeable consideration. If non-cash consideration is overlooked, the return may understate the taxable amount.

How to analyse it

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

• What exactly has the buyer promised to do under the contract?
• Who benefits from the works in legal and practical terms?
• Are the works being carried out on land retained by the seller, or on the land being acquired by the buyer?
• Is the obligation part of the price the seller is receiving for the land, or is it a condition regulating later development of the acquired site?
• What value should be attributed to the works if they are part of the consideration?

The examples suggest that the location and function of the works are highly important. Works on the seller’s separate land are more readily seen as something given to the seller in exchange for the transfer. Works on the purchased land may instead be treated as part of the development arrangement rather than additional consideration.

It is also important to distinguish between the existence of a contractual condition and the SDLT question. A requirement imposed by the seller does not, by itself, mean the value of the works is chargeable consideration. The real issue is what the seller is receiving for the disposal.

Example

Illustration: A developer buys a site for cash and also agrees to build a small office for the seller on land the seller is keeping. On the approach shown in the official material, the office works are likely to be part of the SDLT consideration because they are something of value provided to the seller as part of the bargain.

By contrast, if the developer buys a regeneration site and the sale contract says that, after completion, a community building must be constructed on that site as part of the scheme, the official example suggests that this does not necessarily increase the SDLT consideration. The cash price may remain the only chargeable consideration.

Why this can be difficult in practice

The line can be fact-sensitive. Contracts for development land often contain planning, infrastructure, or community obligations. Some obligations may look like part of the commercial price for the land, while others may look more like restrictions or development conditions attached to the site.

The source material gives only two examples, not a complete test. So care is needed where the facts sit between the two.

Potentially difficult cases include:

• works that partly benefit the seller and partly benefit the development
• works carried out on land that is split between retained land and transferred land
• arrangements where the seller later takes back or occupies part of the developed site
• cases where the contract wording does not clearly separate the cash price from the works obligation

In these situations, the legal and commercial substance of the arrangement matters more than labels alone.

Key takeaways

• SDLT can be charged on non-cash consideration, including building works provided as part of the deal.
• Works carried out for the seller on the seller’s own land are likely to be treated as additional consideration.
• A requirement to build on the land being acquired does not automatically increase the SDLT consideration.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding SDLT on Non-Cash Consideration in Construction Contracts: Two Examples

View all HMRC SDLT Guidance Pages Here