Understanding Non-Cash Consideration in Construction Works for SDLT Transactions

SDLT treatment of building works after substantial performance

Where a buyer is allowed onto land before legal completion and the contract has already been substantially performed, building works carried out afterwards are not usually treated as extra chargeable consideration for SDLT. In HMRC’s example, SDLT is based on the agreed purchase price, and the later works do not increase the tax simply because they were done before completion.

• SDLT is charged on the consideration for the land transaction, which can sometimes include non-cash items such as works or services.
• If the contract is substantially performed before completion, that earlier date becomes the effective date for SDLT and a return and payment may be due then.
• HMRC’s example says that works carried out after that effective date, on land the buyer is acquiring under the transaction, are not chargeable consideration.
• A further SDLT return on completion is only needed if something has changed between substantial performance and completion that affects the tax due.
• The rule is narrow and fact-sensitive: it depends on whether substantial performance has actually happened and whether the works were part of the bargain for the land.

Scroll down for the full analysis.

SDLT and building works carried out after substantial performance: when the works are not extra chargeable consideration

This page explains a narrow but important SDLT point. Sometimes a buyer is allowed onto land before completion and starts building works. The question is whether those works count as part of the consideration for the land transaction. The HMRC example says that, where the buyer has already substantially performed the contract and the works are done afterwards on land being acquired under that transaction, the works are not chargeable consideration.

What this rule is about

SDLT is charged by reference to the chargeable consideration for a land transaction. Consideration is not limited to cash. In some cases, non-cash items, including works or services, can form part of what the buyer gives for the land.

The issue here is timing. If a buyer enters the land before formal completion and begins construction, it may not be obvious whether those works are part of the price paid for the land, or whether they are simply works carried out by the buyer on land it is already treated as having acquired for SDLT purposes.

This matters because if the works are chargeable consideration, they can increase the SDLT bill. If they are not, SDLT is calculated without adding their value.

What the official source says

The HMRC manual gives an example where Company A agrees to buy a freehold plot from B for £1 million. Before completion, A is allowed onto the land under a licence to occupy and starts construction works.

HMRC says that when A goes onto the land, the contract has been substantially performed. That date becomes the effective date of the transaction. At that point, the transaction must be notified on an SDLT return and SDLT is paid on the £1 million consideration.

HMRC then says that, on completion, a further return is needed only if something has changed between substantial performance and completion in a way that affects the tax due. The construction works do not count as chargeable consideration because they were carried out after the effective date on land acquired by the purchaser under the transaction.

The manual also notes that where a return is required both at substantial performance and again on completion under section 44(8) Finance Act 2003, and a statutory condition was met at the first notification, that condition is treated as met for the second notification as well under paragraph 10(2A) of Schedule 4.

What this means in practice

The practical point is that once the contract has been substantially performed, SDLT analysis moves onto a different footing. The buyer is treated as having reached the effective date already. If the buyer then carries out building works on the land it is acquiring, those later works are not brought in as additional consideration merely because they happened before legal completion.

In the HMRC example, the SDLT charge is based on the agreed price of £1 million. The fact that the buyer starts construction before completion does not, by itself, increase the consideration.

This can be important in development transactions, especially where early access is needed so that works can begin before the transfer completes. The key point is not simply that works were carried out before completion. It is that they were carried out after the effective date, and on land already acquired by the purchaser under the transaction for SDLT purposes.

The source also highlights the compliance position. If substantial performance happens before completion, the buyer may need to file and pay SDLT at that earlier point. Completion does not automatically trigger a fresh tax calculation unless something has changed that affects the amount due.

How to analyse it

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

• What is the agreed consideration under the contract? Is it only cash, or are there any obligations to carry out works as part of the bargain?
• Has the contract been substantially performed before completion? For example, has the buyer been allowed into possession or otherwise reached an earlier effective date for SDLT?
• When were the works carried out: before or after that effective date?
• Were the works carried out on land being acquired by the purchaser under the transaction?
• Has anything changed between substantial performance and completion that alters the SDLT due, so that a further return is needed on completion?

On the HMRC example, those questions lead to a clear result. The consideration is £1 million. Entry onto the land under the licence amounts to substantial performance. That creates the effective date. The works are carried out after that date on land acquired under the transaction. So the works are not chargeable consideration.

Example

A developer agrees to buy a site for £1 million. The seller lets the developer onto the site before completion so groundworks can begin. That early entry amounts to substantial performance, so SDLT is due at that point on £1 million. Over the next few weeks, the developer starts construction. When the transfer later completes, those works are not added to the consideration simply because they improved the land before completion. On HMRC’s example, they were done after the effective date on land already acquired for SDLT purposes.

Why this can be difficult in practice

The difficult part is often not the rule in the example, but deciding whether the facts fit it.

First, whether there has been substantial performance can be highly fact-sensitive. Early access under a licence does not always have the same legal effect in every case. The HMRC example states that substantial performance occurred when the buyer went onto the land, but that conclusion depends on the actual rights granted and what happened in practice.

Second, it is important not to turn this example into a wider rule that building works can never be consideration. The example is specifically about works carried out after the effective date on land acquired under the transaction. Different facts may lead to a different result, especially if the obligation to carry out works forms part of the bargain for the land.

Third, the filing position can be overlooked. If substantial performance happens before completion, the SDLT return may be due earlier than parties expect. The later completion stage then needs to be checked to see whether any further return is required because the transaction has changed in a way that affects tax.

Key takeaways

• If a contract is substantially performed before completion, that earlier date is the effective date for SDLT.
• On HMRC’s example, construction works carried out after that effective date on the land being acquired are not chargeable consideration.
• The main practical questions are whether substantial performance has occurred, when the works were done, and whether anything changed before completion that affects the SDLT due.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding Non-Cash Consideration in Construction Works for SDLT Transactions

View all HMRC SDLT Guidance Pages Here