Compulsory purchase compensation and Land Transaction Tax
Compulsory purchase payments
WRA guidance says certain costs and compensation payments do not form part of the amount used for Land Transaction Tax.
- Costs under the 1965 Act are excluded
- Disturbance compensation is excluded
- Land-value payments need separate analysis
Scroll down for the full analysis.
Read the original guidance here:
Compulsory purchase compensation and Land Transaction Tax
Not every payment connected with a compulsory purchase counts for Land Transaction Tax in Wales. The Welsh Revenue Authority says that certain costs and compensation should be excluded.
Where a payment includes sums for land, costs, or disruption caused by moving, the amount used to calculate this property tax may be lower. This is not stamp duty.
What this rule is about
A compulsory purchase happens when a public body uses legal powers to buy land without the owner’s agreement. The payment may cover more than the land itself. It can also cover costs or disruption caused by moving.
What the official source says
According to WRA’s technical guidance, the payments listed below are not chargeable consideration when they arise in connection with a compulsory purchase and meet the stated descriptions. They are excluded from the land tax calculation.
- Costs payable under section 23 of the Compulsory Purchase Act 1965.
- Compensation for disturbance under section 5(6) of the Land Compensation Act 1961.
- Other compensation that is not directly based on the value of the land.
What this means in practice
Where a compensation package contains separate sums for different purposes, assess each sum individually rather than adding every amount together for tax purposes. The purpose of the payment matters.
A payment reflecting the land’s value and a payment for disruption can need separate treatment. This applies even if both appear in the same settlement or are paid at the same time. Keep them distinct.
- Keep a clear breakdown of every amount paid.
- Identify costs paid under the 1965 Act.
- Separate disturbance payments from the price for the land.
How to analyse it
Start with the paperwork, rather than the label attached to the total sum. The documents should show what each part of the payment actually covers. Check each part.
- Is the payment for the value of the land?
- Is it a cost under section 23?
- Is it compensation for disturbance?
- Is it another payment not based directly on land value?
Example
A council compulsorily buys Iwan’s land. Its settlement shows a payment for the land and a separate amount for disturbance.
WRA’s guidance says the disturbance amount is left out. The payment reflecting the land’s value is not covered by that statement.
Why this can be difficult in practice
This is where people can get it wrong: a settlement may show one total figure. A separate label helps, but the payment’s real purpose still matters.
- A single lump sum may need careful review.
- Costs must fall within the section named by the guidance.
- Compensation based directly on land value needs separate treatment.
Key takeaways
- Some compulsory purchase payments are left out.
- Disturbance compensation is not the land price.
- Keep evidence showing each payment’s purpose.
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
- LTTA 2017 section 18 — introduces the rules on taxable payment for a transaction
- LTTA 2017 Schedule 4 para 1 — defines payment given for the land transaction
- an Act of 1965 we do not have an identifier for section 23 — costs arising under a compulsory purchase (no link: an Act of 1965 we do not have an identifier for)
- an Act of 1961 we do not have an identifier for section 5 — compensation heads in a compulsory purchase (no link: an Act of 1961 we do not have an identifier for)
Official guidance
The pages below are the Welsh Revenue Authority’s guidance. Guidance is not law. It sets out how the Welsh Revenue Authority 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. the Welsh Revenue Authority can also change or withdraw guidance, and it may not cover your facts.
Where this is not settled
- The right result can depend on why each payment was made and how the compensation agreement records it.
- The supplied statutory library does not confirm its current currency date.
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 or agreement
- The compensation award or settlement
- A breakdown separating land-value payments, costs and disturbance compensation
- Supporting records showing the purpose of each payment
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 Land Transaction Tax (LTT), the tax on property in Wales. It replaced Stamp Duty Land Tax in Wales on 1 April 2018, and SDLT does not apply in Wales. MY QUESTION Compulsory purchase compensation and Land Transaction Tax [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 - LTTA 2017 section 18 - introduces the rules on taxable payment for a transaction https://www.legislation.gov.uk/anaw/2017/1/section/18 - LTTA 2017 Schedule 4 para 1 - defines payment given for the land transaction https://www.legislation.gov.uk/anaw/2017/1/schedule/4/paragraph/1 - an Act of 1965 we do not have an identifier for section 23 - costs arising under a compulsory purchase - an Act of 1961 we do not have an identifier for section 5 - compensation heads in a compulsory purchase Guidance page from the Welsh Revenue Authority on this topic (guidance, not law): https://www.gov.wales/chargeable-consideration-technical-guidance#5161 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. Guidance from the Welsh Revenue Authority is its 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 - The right result can depend on why each payment was made and how the compensation agreement records it. - The supplied statutory library does not confirm its current currency date. Do not give me a conclusion you cannot support from the provisions above.
Legislation links show the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 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 3 September 2026
Useful article? You may find it helpful to read the original guidance here: Compulsory purchase compensation and Land Transaction Tax
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