Shared Ownership Trusts: Market Value Election and Stamp Duty Land Tax Guidance

SDLT market value election for a shared ownership trust

A purchaser in a shared ownership trust can choose to pay SDLT upfront on the dwelling’s market value instead of mainly on the initial amount paid in. If this election is validly made in the land transaction return, or by amendment within 12 months of the filing date, later rent-equivalent payments are ignored for SDLT and later equity-acquisition payments and the final transfer out of the trust can be exempt, provided any SDLT due on the original trust declaration has been paid.

• The election applies to the declaration of a shared ownership trust and is similar to the market value election for a shared ownership lease.
• For this purpose, market value is assessed on a vacant possession basis, not under the usual SDLT market value rule in section 118.
• The election is made through the land transaction return by showing market value as the chargeable consideration, or by amending the return within 12 months of the filing date.
• Once made, the election is irrevocable and cannot be withdrawn later.
• If the election is valid and the SDLT due at the start is paid, rent-equivalent payments are ignored and later staircasing-style equity payments and the final transfer to the purchaser are exempt from SDLT.
• In practice, it is important to check that the arrangement is a qualifying shared ownership trust, the return clearly makes the election, and the later payments and transfer fall within the rules.

Scroll down for the full analysis.

SDLT on a shared ownership trust: choosing market value treatment

This page explains how the SDLT market value election works for a shared ownership trust. The election can change when SDLT is paid and what later steps are taxed. It matters because, if a valid election is made, SDLT is brought forward to the start of the arrangement and later staircasing-style payments and the final transfer out of trust can be exempt.

What this rule is about

A shared ownership trust allows a purchaser to acquire a beneficial interest in a dwelling over time. At the start, the trust is declared and the purchaser’s initial contribution is set by reference to the property. Later, the purchaser may make further payments to increase their beneficial share, and eventually the trust may end with an interest in the property being transferred to the purchaser.

The rule in this HMRC material deals with an optional SDLT treatment. Instead of being taxed only by reference to the initial amount actually brought in at the start, the purchaser can elect for market value treatment. This is described as analogous to the market value election for a shared ownership lease.

What the official source says

HMRC says that a purchaser under a shared ownership trust may make a market value election under Finance Act 2003 Schedule 9 paragraphs 9 to 10.

For this purpose, the usual SDLT definition of market value in Finance Act 2003 section 118 does not apply. HMRC states that the effect is that market value is worked out on a vacant possession basis.

The election is made through the land transaction return for the declaration of the shared ownership trust. In practice, that means the return shows the market value as the chargeable consideration. An election can also be made later by amending that return so that the consideration is changed to market value, but only if the amendment is made within 12 months of the filing date.

The election is irrevocable. Once made, it cannot later be withdrawn or reversed by another amendment.

HMRC says the effect of a valid election is:

• the chargeable consideration for the declaration of the shared ownership trust becomes the amount specified in the trust terms that equates or relates to the market value of the dwelling and is used to calculate the initial capital; and
• rent-equivalent payments are ignored for SDLT purposes.

HMRC also says that, provided any SDLT due on the declaration of the trust has been paid, two later events are exempt from charge:

• equity-acquisition payments and the resulting increases in the purchaser’s beneficial interest; and
• the transfer to the purchaser of an interest in the trust property when the trust ends.

What this means in practice

The election changes the timing and scope of SDLT.

Without going beyond the source material, the practical idea is this: the purchaser can choose to have SDLT dealt with upfront by reference to the dwelling’s market value, rather than leaving later increases in the purchaser’s stake to create further SDLT issues.

If the election is validly made, later rent-equivalent payments do not count for SDLT. More importantly, later equity-acquisition payments and the final transfer on termination of the trust can be exempt, as long as any SDLT due on the original declaration of the trust has been paid.

This can make the SDLT position more straightforward over the life of the arrangement. But it also means the purchaser is making a binding choice at the outset, or within the amendment window, to be taxed on the market value basis. Once that choice is made, it cannot be undone.

How to analyse it

When looking at a shared ownership trust, the main questions are:

• Is the arrangement in fact a shared ownership trust within the relevant Schedule 9 rules?
• Has a market value election been made in the land transaction return for the declaration of the trust, or by a valid amendment within 12 months of the filing date?
• Does the amount used in the return properly reflect the market value of the dwelling on a vacant possession basis, as required for this purpose?
• Has any SDLT chargeable on the declaration of the trust actually been paid?
• Are the later payments truly equity-acquisition payments under the trust structure, rather than something else?
• Is the later transfer the transfer of an interest in the trust property on termination of the trust?

These questions matter because the exemption for later steps depends on the original election and on the SDLT due at that stage having been paid.

It is also important to separate three things that may otherwise be confused:

• the initial declaration of the shared ownership trust;
• rent-equivalent payments during the life of the arrangement; and
• later equity-acquisition payments and the final transfer out of trust.

The election affects each of those elements in a different way.

Example

Illustration: a dwelling is put into a shared ownership trust for a purchaser. The trust terms specify an amount linked to the full market value of the dwelling and use that figure to calculate the purchaser’s initial capital. The purchaser files the land transaction return for the declaration of the trust and elects for market value treatment by showing that market value amount as the chargeable consideration.

If the election is valid and any SDLT due on that declaration is paid, later rent-equivalent payments are ignored for SDLT. If the purchaser later makes equity-acquisition payments to increase their beneficial share, those payments, and the increase in beneficial interest they produce, are exempt from charge. If the trust then ends and an interest in the property is transferred to the purchaser, that transfer is also exempt.

Why this can be difficult in practice

The source material is concise, but several points can be sensitive in practice.

First, the election is made through the return itself, not by a separate standalone notice. That means the content of the return matters. If the return does not clearly show market value as the consideration, the intended election may be open to dispute.

Second, the market value for this purpose is not the ordinary SDLT market value under section 118. HMRC says the special rule produces a vacant possession valuation. That can matter where the actual arrangement or occupation might otherwise affect value.

Third, the amendment route is time-limited. If the original return did not make the election, the amendment must be made within 12 months of the filing date. After that, the opportunity is lost.

Fourth, the election is irrevocable. A purchaser cannot later revisit the choice simply because the economics of the arrangement changed or because a different SDLT outcome would have been preferable.

Finally, the later exemptions depend on SDLT due on the declaration of the trust having been paid. If that condition is not met, the later steps may not get the intended treatment.

Key takeaways

• A purchaser under a shared ownership trust can elect for SDLT market value treatment on the declaration of the trust.
• For this election, market value is worked out on a vacant possession basis, and the election is made in the return or by amendment within 12 months of the filing date.
• If the election is valid and the SDLT due on the declaration has been paid, rent-equivalent payments are ignored and later equity-acquisition payments and the final transfer on termination of the trust can be exempt.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Shared Ownership Trusts: Market Value Election and Stamp Duty Land Tax Guidance

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