Understanding Incidental Transactions and Exclusions in Stamp Duty Land Tax

SDLT section 75B: incidental transactions in anti-avoidance arrangements

Under SDLT section 75B, HMRC may tax a notional land transaction by looking at the overall arrangement rather than each step separately. Some linked transactions can be treated as incidental and their consideration may be left out, but only if they were carried out solely for a qualifying reason and none of the section 75B(4) exclusion rules apply.

• Section 75B applies where land passes from seller to buyer through a process or series of transactions, and SDLT is worked out by reference to the overall effect.
• Transactions may be incidental if they exist only for qualifying purposes such as building works, non-land goods or services, mortgage lending, or other finance used to fund the acquisition steps.
• If a transaction is only partly incidental, the consideration should be split on a just and reasonable basis rather than wholly included or ignored.
• The word “only” is important: if a transaction has a wider commercial purpose or forms part of the value given for the land, it may not qualify as incidental.
• The section 75B(4) exclusion rules take priority, so a transaction that appears incidental may still have to be counted in the SDLT calculation.
• HMRC guidance is helpful, but the legal result depends on the legislation and the facts, with evidence such as contracts, funding papers, and deal structure often being important.

Scroll down for the full analysis.

SDLT section 75B: when a transaction may be treated as incidental

This page explains a narrow but important point in the SDLT anti-avoidance rules in section 75B. In some arrangements, there are several linked steps around a land transfer. Section 75B can require SDLT to be worked out on a notional transaction instead of simply taxing each step in isolation. When doing that calculation, some transactions may be ignored as incidental. This matters because an incidental transaction may be left out of the chargeable consideration for the notional transaction, unless one of the statutory exclusion rules prevents that treatment.

What this rule is about

Section 75B is aimed at arrangements where a chargeable interest in land moves from one person to another through a process or series of transactions. The legislation looks beyond the formal sequence of steps and asks what the overall transfer is.

In that exercise, not every transaction in the wider arrangement is necessarily part of the price for the land. Some transactions may exist only to support or accompany the land transfer. The source material deals with transactions that may be treated as incidental for this purpose.

If a transaction is truly incidental, its consideration may be left out when calculating the chargeable consideration for the notional land transaction under section 75B. But that is not automatic. The statutory exclusion rules can override incidental treatment.

What the official source says

The HMRC manual says that transactions could be categorised as incidental if they are carried out only for a reason relating to one of the following:

• the construction of a building on property related to the chargeable interest
• the sale or supply of something other than land
• a loan to the purchaser, secured by a mortgage, which enables the purchaser to pay for part of the process or series of transactions that allows the chargeable interest to pass from the vendor to the purchaser
• any other finance that enables the purchaser, or another person, to pay for a process or series of transactions that allows the chargeable interest to pass from the vendor to the purchaser

The manual also says that if a transaction is only partly incidental, it should be apportioned on a just and reasonable basis when working out the chargeable consideration for the notional transaction.

Finally, the manual states that these transactions remain subject to the exclusion rules in section 75B(4). If a transaction might otherwise be incidental but is excluded by those rules, the exclusion takes priority. In that case, the consideration for that transaction must be taken into account in the section 75B calculation.

What this means in practice

The key point is that the label “incidental” depends on purpose and connection. The transaction must be carried out only for a qualifying reason. That is a strict test. If the transaction has a wider role in delivering value for the land, or serves some separate commercial purpose, it may not be incidental.

The examples listed in the source show the kinds of transactions that may sit alongside a land transfer without necessarily forming part of the land price:

• building works connected with the property
• supplies of goods or services that are not land
• mortgage lending used to fund the acquisition steps
• other financing arrangements used to fund those steps

This does not mean those items are always ignored. The question is whether the transaction exists only for that qualifying reason and whether any exclusion rule applies.

Where a transaction is mixed, part incidental and part not, the manual expects a just and reasonable apportionment. That means you do not simply ignore the whole amount or include the whole amount without analysis. You separate the part that properly relates to the incidental element from the part that should still count towards the notional consideration.

How to analyse it

A sensible way to approach the issue is:

• Identify the process or series of transactions through which the chargeable interest moves from the vendor to the purchaser.
• List each transaction and the consideration given for it.
• Ask why each transaction was carried out. Was it carried out only for one of the qualifying reasons described in the source material?
• Check whether the transaction is wholly incidental or only partly incidental.
• If only partly incidental, apportion the consideration on a just and reasonable basis.
• Then check the section 75B(4) exclusion rules. If an exclusion applies, incidental treatment is displaced and the relevant consideration must be included.

In practice, evidence of purpose is likely to matter. Transaction documents, funding documents, development agreements, completion mechanics, and the commercial sequence may all be relevant.

Example

Illustration: a buyer acquires a property through a wider arrangement that also includes a separate construction contract and a loan secured by mortgage. The construction contract is entered into only because a building is to be constructed on land related to the chargeable interest. The loan exists only to finance the acquisition steps. On the manual’s approach, those transactions may be capable of being treated as incidental when calculating the chargeable consideration for the section 75B notional transaction.

But if part of the construction contract price in reality pays for something that is not merely incidental to the wider process, or if an exclusion rule in section 75B(4) applies, that amount may still need to be brought into account. If the construction contract is mixed, a just and reasonable apportionment would be needed.

Why this can be difficult in practice

The source material is short, but the underlying judgement can be difficult.

First, the word “only” is important. Many real transactions have more than one commercial purpose. If a step is not carried out only for a qualifying reason, incidental treatment may be open to challenge.

Second, the line between land consideration and non-land consideration is not always straightforward. A contract may bundle together land, works, goods, finance, and completion mechanics. That can make apportionment difficult.

Third, the source expressly says the exclusion rules take priority. So it is not enough to show that a transaction looks incidental in ordinary terms. You must still test it against the statutory exclusions.

Finally, this is HMRC manual guidance, not the legislation itself. The legal effect comes from section 75B. The manual is useful for HMRC’s view of how the provision operates, but the actual tax result depends on the legislation applied to the facts.

Key takeaways

• A transaction may be incidental under section 75B if it is carried out only for a qualifying reason such as construction, non-land supplies, or acquisition finance.
• If a transaction is only partly incidental, the consideration should be apportioned on a just and reasonable basis.
• The section 75B(4) exclusion rules override incidental treatment, so they must always be checked before leaving any consideration out.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding Incidental Transactions and Exclusions in Stamp Duty Land Tax

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