Understanding Chargeable Consideration for Construction Works in Property Transactions: Example 4 Explained

SDLT and seller construction works as chargeable consideration

If a land sale contract requires the seller to carry out construction or similar works for the buyer, the market value of those works may count as chargeable consideration for SDLT as well as the cash price. This can increase the SDLT payable and may also affect whether the contract has been substantially performed before completion.

• SDLT is charged on total chargeable consideration, which can include non-cash items as well as money.
• Where the seller’s building works are part of the land deal, HMRC may treat the market value of those works as part of the consideration.
• In the example, a £1 million land price plus works worth £750,000 gives total chargeable consideration of £1.75 million.
• A pre-completion payment of £950,000 is not more than 90% of £1.75 million, so it does not by itself amount to substantial performance.
• The key question is whether the works are a real condition of the transaction rather than a separate independent arrangement.
• In practice, parties should check the contract terms, timing and market value of any works carefully when assessing SDLT.

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SDLT and vendor construction works: when building works count as chargeable consideration

This page explains an SDLT point that can be easy to miss in development and land sale contracts. If the seller agrees, as part of the deal, to carry out construction or similar works for the buyer, the value of those works may count as chargeable consideration for SDLT. That can affect both the amount of SDLT due and whether the contract has been substantially performed before completion.

What this rule is about

SDLT is charged on the chargeable consideration for a land transaction. Chargeable consideration is not limited to cash. It can also include non-cash consideration.

The official example deals with a common commercial structure: a seller agrees to transfer land and, as a condition of the contract, also agrees to carry out construction works for the buyer. Even if the buyer pays separately for those works, the market value of the works can still form part of the chargeable consideration for the land transaction.

This matters because SDLT is calculated by reference to the total chargeable consideration, not just the headline land price stated in cash terms.

What the official source says

The source example involves a seller, company B, selling freehold land to an unconnected buyer, company A, for £1 million. As a condition of the contract, B must also complete construction works for A. Those works have an estimated market value of £750,000, and A will pay for them.

Before completion, A pays £950,000 and B starts the construction works.

HMRC’s position in the example is:

• the construction works are chargeable consideration, valued at their market value of £750,000;
• because the works are a condition of the transaction, the total consideration is not just the £1 million cash price, but £1.75 million in total;
• the £950,000 paid before completion is therefore not more than 90% of the total consideration;
• that payment does not amount to substantial performance of the contract; and
• the SDLT return should be filed on completion, or earlier if substantial performance happens before then, using total chargeable consideration of £1.75 million.

What this means in practice

The practical point is that you must look at the whole bargain, not just the cash being paid for the land.

If the seller is obliged under the land deal to do construction or similar works for the buyer, those works may be treated as part of what the buyer is giving for the land. In the example, the buyer is effectively paying £1 million in cash and also paying for the seller’s construction works worth £750,000. HMRC treats the total as £1.75 million of chargeable consideration.

That has two immediate consequences.

First, the SDLT calculation is based on £1.75 million, not £1 million.

Second, when deciding whether the contract has been substantially performed before completion, you do not test the pre-completion payment against the cash price alone. You test it against the total chargeable consideration, including the market value of the works. In the example, £950,000 is more than 90% of £1 million, but it is not more than 90% of £1.75 million. So there is no substantial performance on that ground.

How to analyse it

A sensible way to analyse this kind of arrangement is to ask the following questions.

• Is the seller required, under the contract for the land transaction, to carry out construction or similar works for the buyer?
• Are those works a condition of the transaction, rather than a separate and genuinely independent arrangement?
• What is the market value of those works?
• Does that market value need to be added to the cash price when calculating chargeable consideration?
• Have there been any pre-completion payments, and if so, do they exceed 90% of the total chargeable consideration once the non-cash element is included?
• If completion has not yet occurred, has there been substantial performance for any other reason?

The key feature in the example is that the construction works are not incidental or optional. They are part of the contractual package. That is why HMRC treats their market value as chargeable consideration.

Example

Illustration based on the official example:

A developer agrees to sell a site for £1 million. Under the same contract, the developer must also build certain works for the buyer, and those works have a market value of £750,000. Before legal completion, the buyer pays £950,000.

If you looked only at the cash land price, you might think the buyer has paid more than 90% and that substantial performance has happened. But on HMRC’s approach, the total chargeable consideration is £1.75 million, because the construction works count as non-cash consideration. £950,000 is not more than 90% of £1.75 million, so that payment alone does not trigger substantial performance. SDLT is then due on completion unless substantial performance happens earlier in some other way.

Why this can be difficult in practice

The main difficulty is identifying whether the works are truly part of the consideration for the land transaction.

In some transactions, construction obligations may sit alongside the land sale in a way that makes the commercial position look more complicated than the legal analysis. The official example is straightforward because the works are expressly a condition of the contract. Real transactions may involve multiple agreements, staged works, development obligations, or pricing mechanisms that are less clear.

Valuation can also be difficult. The example uses an estimated market value for the works. In practice, parties may need to consider carefully what the correct market value is and whether the contractual pricing matches that value.

Another trap is timing. A party may assume that paying most of the stated cash price causes substantial performance. That may be wrong if non-cash consideration has to be added in before applying the 90% test.

The source example does not explore every possible variation. It shows HMRC’s treatment where the seller’s construction works are a condition of the transaction and have an identifiable market value.

Key takeaways

• For SDLT, chargeable consideration can include non-cash consideration such as construction works the seller must carry out as part of the deal.
• If those works are part of the transaction, their market value may need to be added to the cash price when calculating SDLT.
• That wider figure also matters when testing whether pre-completion payment is enough to amount to substantial performance.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding Chargeable Consideration for Construction Works in Property Transactions: Example 4 Explained

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