Stamp duty relief for compulsory purchase and third-party development
Compulsory purchase and SDLT
A qualifying compulsory purchase in England can be exempt from SDLT where it helps another person develop the land.
- The buying body must have made the compulsory purchase order.
- The development must be carried out by somebody else.
- A later transfer to the developer is considered separately.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty relief for compulsory purchase and third-party development
Stamp duty relief for compulsory purchase and development
Stamp duty land tax may not be due when a body uses compulsory purchase to help somebody else develop land. Another person must develop the land.
What this rule is about
Sometimes a public body needs to bring land together so that a developer can carry out a project. Parliament created a stamp duty exemption for that first purchase in the right circumstances.
This is not a general exemption for building projects. Instead, it is a narrow rule about who makes the compulsory purchase order, why they buy the land, and who will develop it.
What the official source says
Finance Act 2003 section 60 exempts a qualifying compulsory purchase from SDLT. HMRC’s manual sets out the England rule in practical terms.
The buying body will usually be a local planning authority. However, that label is not a legal condition, and another qualifying body may meet the rule. Status alone is not required.
- The body buying the land must be the one that made the compulsory purchase order.
- That order must be used to help development of the land.
- A different person must carry out that development.
- An agreed sale can still qualify if the purchase is subject to the compulsory purchase order.
- For England, “development” has the meaning given by planning law.
- A later transfer of the land to the developer is dealt with under the normal SDLT rules.
That last point matters. It applies to the compulsory purchase, not automatically to every later step in the project.
What this means in practice
First, separate the two land transfers. On the first transfer, the public body may receive the exemption when it buys the land. Any later purchase by the developer is a different transaction.
You might assume that an agreed price prevents a purchase from being compulsory, but HMRC says otherwise when the other conditions are met and the purchase remains subject to a compulsory purchase order. Price is not decisive.
- Check who formally made the compulsory purchase order.
- Check that the same body is the one buying the land.
- Identify the person or organisation expected to develop it.
- Make sure that developer is not the buying body.
- Keep records showing why the compulsory purchase was made.
- Consider the later sale to the developer separately.
An agreement can settle the terms without changing the route by which the land is bought, provided that the compulsory purchase order still does real work. The order remains essential.
How to analyse it
Ask the questions in order. Starting with the planning project alone can lead you to miss the point that decides the exemption.
- Is there a compulsory purchase order affecting this land?
- Who made that order?
- Who is buying the land from the owner?
- Are those two people the same?
- What development is the purchase intended to help?
- Who will carry out that development?
- Is that person different from the body making the order?
- Was the sale agreed, and does the order still form the basis of the purchase?
- Will the land later pass to the developer?
For England, the final planning question uses the statutory meaning of development. Calling a project “development” in correspondence will not settle that issue by itself.
Example
A council makes a compulsory purchase order over a vacant site. Riverside Homes, an unrelated developer, will carry out the planned project. The council buys the site from the owner for that purpose.
The owner and Riverside Homes had already agreed a price. That agreement does not by itself block the exemption if the council’s purchase remains subject to its compulsory purchase order and the other conditions are met. The order must still apply.
After the council transfers the site to Riverside Homes, the later purchase is considered under the normal SDLT rules, even though the council’s earlier purchase may have qualified for exemption. Relief does not carry forward.
Why this can be difficult in practice
Finding an order is often straightforward. Proving the purpose of the purchase and the separate role of the developer is usually harder.
Names can mislead here. Several connected bodies, changing plans, or detailed agreements made before the order is used may all be involved in a project. Context matters.
- An agreed sale is not automatically disqualifying.
- Yet an agreement cannot replace the compulsory purchase order.
- The buyer must be the body that made the order.
- The development must be by somebody else.
- Project papers should match the stated purpose of the order.
- A later sale needs its own SDLT analysis.
If you only remember one thing, make it this: the relief turns on the compulsory purchase helping another person develop the land.
Key takeaways
- The exemption is for a qualifying compulsory purchase, not every project sale.
- The order maker must also be the body buying the land.
- The land must be bought to help development by a separate person.
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 section 60 — exemption for compulsory purchase enabling third-party development
- an Act of 1990 we do not have an identifier for section 55 — meaning of development for land planning purposes (no link: an Act of 1990 we do not have an identifier for)
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
- Whether a purchase truly facilitates development by a separate person can depend on the documents and the real arrangement.
- An agreed price or sale contract is not automatically fatal, but the compulsory purchase order must still be the basis for the purchase.
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 compulsory purchase order and proof of who made it
- Documents showing the intended developer is a different person
- Plans, agreements and decisions showing the purpose of the purchase
- The sale agreement and completion documents
- Documents for any later transfer to the developer
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 relief for compulsory purchase and third-party development [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 section 60 - exemption for compulsory purchase enabling third-party development https://www.legislation.gov.uk/ukpga/2003/14/section/60/2025-11-17 - an Act of 1990 we do not have an identifier for section 55 - meaning of development for land planning purposes HMRC's guidance page on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm22010 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. HMRC guidance is HMRC's 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 - Whether a purchase truly facilitates development by a separate person can depend on the documents and the real arrangement. - An agreed price or sale contract is not automatically fatal, but the compulsory purchase order must still be the basis for the purchase. 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 1 September 2026
Useful article? You may find it helpful to read the original guidance here: Stamp duty relief for compulsory purchase and third-party development
Search Land Tax Advice with Google
