How can a landowner keep one new-build plot while a developer sells the others without creating unnecessary SDLT?

Introduction

This issue commonly arises where land is still owned by one person, but a developer has paid for and carried out the build. The practical question is how to document the arrangement so that one completed dwelling is retained by the landowner, while the other dwellings are sold to third-party buyers, without triggering avoidable Stamp Duty Land Tax (SDLT) charges.

In many cases, the key SDLT risk is an unnecessary intermediate transfer. If the developer first takes a transfer of the plots and then sells them on, there may be two taxable land transactions instead of one. The structure therefore matters.

The Question

A landowner owns a development site outright. Planning permission was granted for three dwellings, and the site was effectively divided into three plots. A developer then funded and carried out the construction of all three houses. The landowner now wishes to keep one completed plot, while the developer wants to realise its return by selling the other two plots to third-party buyers.

An old option agreement exists but was never implemented. The question is what structure is likely to be the most efficient from an SDLT perspective, and also the simplest in practical conveyancing terms, where:

• the landowner keeps one completed dwelling;
• the other two dwellings are sold to end-buyers; and
• the developer needs to recover build costs and profit.

Nick’s Explanation

Nick’s core view was that the cleanest SDLT outcome is usually achieved if the developer does not take a transfer of the legal title to the sale plots before the end-buyers complete.

In anonymised form, his reasoning was:

• the landowner remains the legal owner of the freehold;
• if the developer first acquires the plots and then sells them on, that can create an avoidable SDLT charge on the developer’s acquisition, followed by the buyers’ own SDLT on their purchases;
• the better route is often a direct sale from the landowner to each end-buyer, with the developer’s commercial entitlement dealt with under a development agreement or tripartite completion structure;
• if the retained plot has always remained in the landowner’s ownership, there is usually no SDLT event simply because the landowner keeps it.

Nick also noted that an unused historic option agreement does not automatically improve the SDLT position. If exercised now, it may still produce a current land transaction with current SDLT consequences, and it may add complexity rather than remove it.

The Law

SDLT is charged on land transactions under Part 4 of the Finance Act 2003. Broadly, SDLT applies where a chargeable interest is acquired for chargeable consideration.

For this type of arrangement, the most relevant provisions are the rules on contracts and pre-completion transactions, especially:

• Finance Act 2003, section 44, dealing with contracts and conveyances;
• Finance Act 2003, section 45, dealing with contract assignments, subsales and other transactions involving transfer of rights;
• related provisions in Part 4 of Finance Act 2003 concerning chargeable consideration and connected transactions where relevant.

The broad SDLT principle is simple. If A contracts to acquire land from B, but before completion A enters into a qualifying transfer of rights or subsale arrangement so that the land is ultimately conveyed directly from B to C, the legislation may prevent a full SDLT charge arising on A’s intermediate position. Instead, the effective land transaction for SDLT purposes may be the direct movement to C, depending on the exact drafting and mechanics.

That said, these rules are technical. They do not rescue every arrangement. The legal documents must match the intended tax analysis.

There is also a separate property law point. Buildings erected on land generally accede to the land. In ordinary terms, what is built on the land belongs to the landowner unless the legal structure provides otherwise. That matters when considering whether the retained dwelling ever left the landowner’s ownership in the first place.

Analysis

The practical SDLT analysis usually works as follows.

First, identify who owns the land now. If the landowner still holds the legal title to the whole site, that is the starting point. The developer may have funded the build and may have strong contractual rights, but that does not by itself mean the developer has acquired a chargeable land interest.

Second, separate the retained plot from the sale plots.

• For the retained plot, if the landowner has remained owner throughout and no beneficial interest was transferred to the developer, there is generally no SDLT event merely because the landowner keeps that plot.
• For the sale plots, the objective is to avoid an intermediate acquisition by the developer if that step is not commercially necessary.

Third, consider the inefficient route. If the landowner transfers the sale plots to the developer first, and the developer then sells them to end-buyers, there may be:

• one land transaction from landowner to developer; and
• a second land transaction from developer to each buyer.

That can mean SDLT on the developer’s acquisition, with the buyers then paying SDLT again on their own purchases. Even if the economics make sense commercially, it is often unattractive from an SDLT point of view.

Fourth, consider the more efficient route. If each sale plot is conveyed directly from the landowner to the end-buyer, the buyer is the person clearly acquiring the chargeable interest. The developer’s return can then be dealt with under the contractual arrangements between landowner and developer, for example by:

• a development agreement;
• a building contract;
• a profit-share arrangement;
• a tripartite completion mechanism under which sale proceeds are distributed in an agreed order.

Fifth, test whether the developer has already acquired any land interest. This is critical. If the existing development documents gave the developer a beneficial interest in one or more plots, or rights amounting to a transfer of rights for SDLT purposes, the analysis becomes more complicated. The assumption behind the simpler answer is that the developer funded and built the units but did not itself become owner of the plots.

Sixth, deal carefully with the retained plot. The fact that the developer paid for the construction of the retained dwelling does not itself create SDLT. The SDLT question is whether there has been a land transaction. If the landowner owned the plot throughout, the issue is usually commercial accounting between the parties, not SDLT on a transfer back.

Seventh, be cautious with the old option agreement. An option that was never implemented is not necessarily useful just because it exists. If it is now exercised, that may create a present-day acquisition with present-day SDLT consequences. It may also create drafting and linked-transaction issues. In many cases, using the old option adds complexity without improving the SDLT result.

Eighth, make sure the conveyancing works in practice. End-buyers and their lenders will usually want clear evidence that:

• the seller has good title;
• the developer had authority to build and market the property;
• all developer rights are properly documented and released on completion;
• new-build requirements, warranties, planning and building regulation matters are in order.

That is why a direct sale structure is often supported by a tripartite agreement or carefully integrated sale and development documents.

Outcome

On the facts described, the most SDLT-efficient structure is likely to be:

• the landowner keeps the retained plot without any transfer of that plot to the developer;
• the two sale plots are sold directly by the landowner to the end-buyers;
• the developer does not take an intermediate transfer of the legal title to those plots;
• the developer’s entitlement to recover build costs and profit is documented separately in a development agreement, building contract, profit-share arrangement, or tripartite completion structure.

If that structure is properly documented and the developer has not already acquired a chargeable land interest, the usual SDLT result is that:

• there is no SDLT merely because the landowner retains the one plot; and
• there is one SDLT charge per sold plot, paid by the end-buyer in the ordinary way.

Practical Steps

Anyone in this position should work through the following points before exchanging contracts:

1. Review the title and all existing agreements, including any option, promotion, development, building or profit-share documents.
2. Confirm whether the developer has any legal or beneficial interest in any plot, or only contractual rights to payment.
3. Identify whether the retained plot has remained with the landowner throughout.
4. Structure the sale plots so that title passes directly from the landowner to each end-buyer if possible.
5. Document the developer’s financial entitlement separately and clearly, including how sale proceeds are to be applied on completion.
6. Ensure the conveyancing pack explains the developer’s role so that buyers and lenders are comfortable with title and completion mechanics.
7. Take separate advice on taxes outside SDLT, especially Capital Gains Tax, Corporation Tax, Income Tax and VAT where relevant.
8. Check whether any connected-party, market value, or anti-avoidance issues could affect the analysis.

If anyone is considering arguing that a dwelling was uninhabitable or not suitable for use as a dwelling for SDLT purposes, they should note that the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Minor defects, incompleteness, or the need for works will not necessarily be enough.

Conclusion

Where a landowner still owns the site and a developer has funded the build, the usual SDLT-efficient route is to avoid transferring the sale plots into the developer’s name unless there is a strong commercial reason to do so. A direct transfer from landowner to end-buyer, combined with proper development documentation, will often avoid an unnecessary intermediate SDLT charge. The retained plot will usually not create SDLT if it never left the landowner’s ownership.

Legal References Used

• Finance Act 2003, Part 4
• Finance Act 2003, section 44
• Finance Act 2003, section 45
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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