Compulsory Purchase Order Relief for Third-Party Development in England

SDLT Relief for Compulsory Purchase to Enable Third-Party Development

This is a limited SDLT relief for land bought under a compulsory purchase order by the body that made the order, usually a local authority, where the aim is to enable development by someone else. It applies to the compulsory acquisition itself, not automatically to any later transfer of the land to the developer.

• The relief can apply only if the purchaser acquires a chargeable interest through a compulsory purchase order that it made itself.
• The acquisition must be for the purpose of facilitating development by a third party, rather than development by the acquiring body.
• A sale agreed by negotiation can still qualify if it remains part of the compulsory purchase order process.
• Any later transfer of the land to the developer is a separate SDLT transaction and is taxed in the normal way.
• In England, the meaning of “development” follows the planning law definition in section 55 of the Town and Country Planning Act 1990.
• In practice, the legal structure, the purchaser’s role, and the documents linking the acquisition to the compulsory purchase order are all important.

Scroll down for the full analysis.

SDLT relief for compulsory purchase used to facilitate development by someone else

This page explains a narrow SDLT relief that can apply when land is acquired under a compulsory purchase order and the acquisition is intended to enable development by a third party. The relief is aimed at the authority or other body making the compulsory purchase, not at the developer who will later receive the land.

What this rule is about

Normally, buying land is a chargeable land transaction for SDLT. This rule creates a specific relief where a person acquires a chargeable interest through a compulsory purchase order that they themselves made, and the purpose of that acquisition is to facilitate development by someone else.

In practice, this will often involve a local planning authority using compulsory purchase powers to assemble land so that a separate developer can carry out a scheme.

The key point is that the relief concerns the compulsory acquisition itself. It does not automatically carry through to later transactions.

What the official source says

The official material says that relief may be claimed where:

• there is a purchase of a chargeable interest,
• the purchase is by way of a compulsory purchase order made by the purchaser, and
• the purchase is to facilitate development by a third party.

The purchaser must be the person who made the compulsory purchase order. The source notes that this would usually be the local planning authority.

The source also makes two further points:

• It does not matter, for this relief, that the acquisition is effected by agreement rather than through a contested compulsory process, provided the transaction is still the subject of the compulsory purchase order and the other conditions are met.
• Any later transfer of the land to the third party developer is taxed in the normal way for SDLT purposes.

On the meaning of development, the source says that for England the term has the same meaning as in section 55 of the Town and Country Planning Act 1990.

What this means in practice

This relief can remove SDLT from the authority’s compulsory acquisition, but only if the statutory conditions are satisfied. It is not a general exemption for regeneration projects or public sector land assembly.

The most important practical consequences are these:

• The relief belongs to the purchaser that made the compulsory purchase order. If the buyer did not make the order, the relief does not apply on the wording described in the source.
• The acquisition must be linked to facilitating development by a third party. If the acquiring body is itself the developer, this relief is unlikely to fit the facts described in the source.
• A negotiated sale can still qualify. A landowner does not have to be forced through to completion after a dispute. If the land is sold by agreement, but the sale is still under the compulsory purchase framework and all other conditions are met, that agreement does not block relief.
• The later transfer to the developer is a separate SDLT event. Relief on the compulsory acquisition does not mean the onward transfer is also relieved.

This matters because land assembly for development often happens in stages. One transaction may qualify for relief while the next one does not.

How to analyse it

A sensible way to approach this issue is to ask the following questions in order.

• Is there a purchase of a chargeable interest in land?
• Is the acquisition by way of a compulsory purchase order?
• Was that compulsory purchase order made by the purchaser itself?
• Is the purpose of the acquisition to facilitate development by a third party, rather than by the acquiring body?
• If the transaction was agreed rather than imposed, is it still properly a purchase that is the subject of the compulsory purchase order?
• Is there a later transfer to the developer, and if so, has that later transaction been considered separately for SDLT?

The reference to section 55 of the Town and Country Planning Act 1990 matters because the word development is not being used loosely. Its meaning follows the planning law definition for England. That can affect whether the intended project is of the right kind for the relief.

Example

A local authority makes a compulsory purchase order to assemble several plots for a town-centre redevelopment that will be carried out by a private developer. One owner then agrees to sell voluntarily at a price negotiated with the developer, but the sale is completed as part of the compulsory purchase process and the buyer is still the authority that made the order.

On the basis of the source material, the fact that terms were agreed does not by itself prevent relief. The authority may be able to claim SDLT relief on its acquisition, assuming the other conditions are met. If the authority later transfers the assembled site to the private developer, that later transfer is subject to SDLT in the normal way.

Why this can be difficult in practice

The main difficulty is often not the existence of a development project, but identifying exactly who is doing what and under which legal mechanism.

In particular:

• A transaction may look voluntary in commercial terms even though it sits within a compulsory purchase framework. The source says that agreement on terms does not itself prevent relief, but the acquisition must still be by way of the compulsory purchase order.
• The phrase to facilitate development by a third party can be fact-sensitive. The relief depends on the role of the acquiring body and the role of the eventual developer.
• The planning law meaning of development may be wider or narrower than a reader expects. The source points to the statutory planning definition, not an everyday description of improvement or regeneration.
• It is easy to assume that if the initial compulsory acquisition is relieved, the onward transfer will be too. The source expressly says that the later transfer is taxed in the normal way.

The official material here is short and does not set out every evidential or procedural point. So, in practice, the precise structure of the acquisition and the documentation linking it to the compulsory purchase order are likely to matter.

Key takeaways

• This SDLT relief can apply to a compulsory acquisition made by the body that made the compulsory purchase order, usually to enable development by someone else.
• A negotiated sale can still qualify if it remains a purchase by way of the compulsory purchase order and the other conditions are met.
• The later transfer of the land to the third party developer is a separate transaction and is subject to SDLT in the normal way.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Compulsory Purchase Order Relief for Third-Party Development in England

View all HMRC SDLT Guidance Pages Here