Stamp duty where the seller must carry out construction works
Construction work can be part of the land price
Where a land sale requires the seller to carry out building work, the work’s value may count when working out stamp duty. In HMRC’s example, £1 million cash and £750,000 of work produce a total of £1.75 million.
- Look beyond the cash price.
- Check whether the seller must do the work.
- Value the work in the open market.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty where the seller must carry out construction works
Stamp duty where the seller must carry out construction works
If part of your land deal requires the seller to build, repair or improve something, stamp duty may be based on more than the cash land price. That work can count too. This can also affect whether stamp duty is due before the sale completes.
What this rule is about
Stamp duty land tax, often called SDLT or stamp duty, uses the full amount you give for land. That amount can include more than money paid on completion.
For example, the agreement may require the seller, as a condition of selling the land and alongside the cash price, to build access roads, finish a building, or improve the site. That obligation can matter. If the deal includes that promise, you may need to add its value to the cash price.
The distinction can sound technical. Yet it can alter both the tax figure and the date when the return is due.
What the official source says
HMRC’s manual gives an example involving two unconnected companies. One company agrees to sell a freehold plot for £1 million. Under the contract, the seller must also carry out construction work for the buyer, with an estimated value of £750,000.
Before the sale completes, the buyer pays £950,000 and the seller starts the work. HMRC says this does not amount to substantial performance of the contract.
- The promised construction work is part of what the buyer gives for the land.
- Its market value is £750,000 in HMRC’s example.
- The total amount used for the calculation is therefore £1.75 million.
- The £950,000 payment is less than 90% of that total.
- HMRC says the payment does not bring the contract forward as substantially performed.
The legislation supports the wider point: works can be left out only if every condition in Schedule 4 paragraph 10 is met. One condition is that the seller, or someone connected with the seller, is not required by the deal to do the work.
What this means in practice
Do not look only at the sum labelled as the land price. Read the whole agreement. A building obligation may be payment for the land in another form.
What matters here is whether the seller must do the work as part of the land deal. If so, the special exclusion for works does not apply.
- Add the cash price and the open-market value of required works.
- Use that combined figure when considering the payment already made.
- Keep evidence supporting the value placed on the work.
- Check whether anyone has taken possession before completion.
- Prepare the tax calculation using the full amount, not only the cash sum.
HMRC’s source says an SDLT1 should be lodged on completion in its example. The current legislation instead requires a return for a notifiable transaction before the end of 14 days after its effective date. Usually that date is completion, unless the contract was substantially performed earlier.
How to analyse it
Start with the contract, rather than the payment ledger. The labels used by the parties do not settle what counts as payment for the land.
- Identify the cash price for the land.
- List every promise made by the buyer or seller as part of the deal.
- Ask whether the seller must carry out building, repair or improvement work.
- Check whether the work is due after the effective date.
- Check whether it is on land being bought, or land already held by the buyer.
- Check whether the seller or a connected person is required to do it.
- Find the open-market value of any work that counts.
- Add that value to the cash payment.
- Check completion, possession and payments to find the effective date.
The works exclusion needs all of its conditions. Meeting one or two is not enough.
Example
In HMRC’s example, Company A agrees to pay Company B £1 million for a plot. Company B must also carry out construction work for A. The work is worth £750,000 in the open market.
When the cash payment and the value of Company B’s required construction work are both included, the full amount paid for the deal is £1,750,000: £1 million in cash plus £750,000 for the work. That is the relevant total. A has paid £950,000 before completion. HMRC treats that as less than 90% of £1.75 million, so the contract has not been substantially performed through payment alone.
On these facts, completion remains the effective date unless the buyer takes possession or another event occurs before completion that changes the answer under the rules. Stamp duty is worked out using £1.75 million, not £1 million.
Why this can be difficult in practice
The hard question is what the work really is. A separate building contract is not automatically outside the land deal. Equally, work arranged by the buyer independently may not be part of the land price.
- A contract may split land and building costs into separate documents.
- Words such as ‘condition’ and ‘obligation’ can matter greatly.
- The estimated cost of work may not be its open-market value.
- Work may start before completion, but that alone does not answer the tax question.
- HMRC’s stated 90% view should not be confused with statutory wording.
This is the part people can miss: the figure used to test an early payment may be larger than the money price written beside the plot.
Key takeaways
- Required construction work can add to the amount used for stamp duty.
- Use the work’s open-market value, as well as the cash price.
- Check the full contract before deciding whether an early payment triggers stamp duty.
Technical analysis
For advisers, and for anyone who wants to check the law behind this page. You do not need this section to understand the guidance above.
Legislation
- FA 2003 Schedule 4 para 1 — what counts as payment for a land purchase
- FA 2003 Schedule 4 para 7 — valuing non-cash payment at the effective date
- FA 2003 Schedule 4 para 10 — when construction works count towards the purchase price
- FA 2003 section 44 — when a contract is substantially performed before completion
- FA 2003 section 119 — the date that normally counts for stamp duty
- FA 2003 section 76 — the duty to file a land transaction return
Official guidance
The pages below are HMRC’s guidance. Guidance is not law. It sets out how HMRC reads the legislation, and it is not binding on you, on a tribunal or on a court. Where guidance and the legislation differ, the legislation wins. HMRC can also change or withdraw guidance, and it may not cover your facts.
Where this is not settled
- The source does not give a transaction date, the full contract, or evidence of the works’ market value.
- The supplied legislation is current only to 17 November 2025. Current law must be checked for a later transaction.
- HMRC’s 90% approach in this example is stated in its manual, while the legislation uses the words ‘whole or substantially the whole’.
Evidence you would need
This kind of case is decided on the facts of the individual property. These are the records that usually settle it, and the ones an adviser would ask you for.
- The signed contract and any building specification
- Terms showing whether the seller must carry out the works
- Invoices, payment records and construction timetable
- A valuation of the works in the open market
- Completion date and any earlier possession arrangements
Explore this with an AI
Readers often want to test their own situation. Copy the prompt below into ChatGPT, Claude or Gemini. It hands the model the actual legislation for this page rather than letting it answer from memory, and tells it to be explicit about what is uncertain. What comes back is information, not advice – check it against the links above.
I am researching UK Stamp Duty Land Tax (SDLT), which applies in England and Northern Ireland. MY QUESTION Stamp duty where the seller must carry out construction works [Replace this with your own situation: what you are buying, the price, the dates, who the buyer is, and what you plan to do with the property.] THE LAW THIS TURNS ON - FA 2003 Schedule 4 para 1 - what counts as payment for a land purchase https://www.legislation.gov.uk/ukpga/2003/14/schedule/4/paragraph/1/2025-11-17 - FA 2003 Schedule 4 para 7 - valuing non-cash payment at the effective date https://www.legislation.gov.uk/ukpga/2003/14/schedule/4/paragraph/7/2025-11-17 - FA 2003 Schedule 4 para 10 - when construction works count towards the purchase price https://www.legislation.gov.uk/ukpga/2003/14/schedule/4/paragraph/10/2025-11-17 - FA 2003 section 44 - when a contract is substantially performed before completion https://www.legislation.gov.uk/ukpga/2003/14/section/44/2025-11-17 - FA 2003 section 119 - the date that normally counts for stamp duty https://www.legislation.gov.uk/ukpga/2003/14/section/119/2025-11-17 - FA 2003 section 76 - the duty to file a land transaction return https://www.legislation.gov.uk/ukpga/2003/14/section/76/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm04060c HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. Guidance from HMRC is its view of the law, not the law, and does not bind a tribunal or a court. 2. Tell me what the rule actually requires, in plain English. 3. Tell me which facts decide the answer, and which facts would change it. 4. Tell me what evidence I would need to support the position. 5. Be explicit about anything unsettled or fact-sensitive. Do not guess. 6. Your training data has a cutoff and SDLT rates and reliefs change at fiscal events. Say so if you are not sure the law is current. POINTS ALREADY KNOWN TO BE UNCERTAIN ON THIS TOPIC - The source does not give a transaction date, the full contract, or evidence of the works' market value. - The supplied legislation is current only to 17 November 2025. Current law must be checked for a later transaction. - HMRC's 90% approach in this example is stated in its manual, while the legislation uses the words 'whole or substantially the whole'. Do not give me a conclusion you cannot support from the provisions above.
Legislation links show Finance Act 2003 as it stood on 2025-11-17. The law may have changed since, and the rules that apply are those in force on the date of your transaction. The official guidance this page is based on is here.
This page was last updated on 31 August 2026
Useful article? You may find it helpful to read the original guidance here: Stamp duty where the seller must carry out construction works
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