Technical Guidance on Land Transaction Tax Reliefs for Compulsory Purchase and Planning Obligations

LTT relief for compulsory purchase and planning obligations in Wales

Two narrow Land Transaction Tax reliefs can reduce a double tax charge in some Welsh development projects. One may apply where a public authority acquires land under its own compulsory purchase order to help a third-party developer, and the other may apply where a public body receives land, buildings or infrastructure from a developer to meet an enforceable planning obligation.

• Compulsory purchase relief only covers the authority’s own acquisition under the compulsory purchase order, not the later transfer to the developer.
• Relief is not available for compulsory purchase if the authority that made the order is also the developer.
• Planning obligations relief requires an existing enforceable section 106 obligation, or a qualifying modification, that binds the seller before the transfer takes place.
• For planning obligations relief, the buyer must be a qualifying public body and the transfer must usually happen within five years of the latest relevant obligation or modification.
• In both cases, the exact legal transaction, timing and documents are critical, because relief may apply to one step in a development but not to others.

Scroll down for the full analysis.

LTT relief for compulsory purchase and planning obligations

This page explains two specific Land Transaction Tax reliefs in Wales that are aimed at avoiding an unnecessary double tax charge in development situations. One applies where a public authority acquires land under a compulsory purchase order to facilitate development by someone else. The other applies where land or a facility is transferred to a public body to comply with a planning obligation. Both reliefs are narrow. The conditions matter.

What this rule is about

Development projects can involve more than one land transfer. Without relief, that can produce two separate LTT charges even where one of the transfers is really part of getting the development delivered.

The Welsh rules in Schedule 21 provide relief in two situations:

• where a body such as a local authority buys land under a compulsory purchase order it has made, to help a third party carry out development; and
• where a public body acquires land, buildings or a facility from a developer because a planning obligation requires that transfer.

The policy behind both reliefs is similar. If the law did not intervene, a development structure could create an effective double charge to LTT.

What the official source says

For compulsory purchase relief, the buyer must be the person who made the compulsory purchase order, and the acquisition must be by way of that compulsory purchase order. The purchase must be made to facilitate development by a third party. Relief is not available if the person making the compulsory purchase order is also the developer.

The guidance gives the example of a local authority supporting a major development. The developer may try to buy the required land by agreement. If that fails, the local authority may make a compulsory purchase order, acquire the land, and later transfer it to the developer. Normally there would be two chargeable transactions: first from the landowner to the local authority, and then from the local authority to the developer. The relief applies only to the first acquisition by the authority, if the conditions are met. The later transfer to the developer remains chargeable in the normal way.

The guidance also says that relief is not blocked merely because the seller and the developer have already agreed terms. What matters is that the sale to the authority is the subject of the compulsory purchase order and the authority is the buyer. If the land passes directly from the original owner to the developer, the relief is not available because the authority is not the buyer.

For planning obligations relief, the buyer must be a public body and the transaction must be undertaken to comply with a planning obligation, or a modification of one. Three conditions must all be met:

• the planning obligation must already be in place and enforceable against the seller;
• the purchaser must be a public body; and
• the transaction must take place within five years of the date the planning obligation was entered into or last modified, using the latest relevant date.

The guidance explains that this relief is designed for cases where a developer is required, as part of obtaining planning permission, to provide infrastructure or another facility and then transfer it to a public authority. Without relief, the developer may bear an effective second LTT cost because the public body would usually seek reimbursement of the LTT arising on the transfer to it.

The guidance adopts statutory definitions for key terms. “Development” has the same meaning as section 55 of the Town and Country Planning Act 1990. A “planning obligation” means one within section 106 of that Act, entered into in accordance with section 106(9). A modification is one within section 106A(1). The listed public bodies include county and county borough councils, certain Welsh NHS bodies, and any person specified by Welsh Ministers in regulations.

What this means in practice

These reliefs do not remove LTT from an entire development arrangement. They only relieve a specific transaction if the statutory conditions are met.

In a compulsory purchase structure, the practical effect is usually this:

• the authority’s acquisition from the landowner may qualify for relief;
• the onward transfer from the authority to the developer does not qualify under this relief and is taxed in the normal way.

That means the relief prevents one LTT charge, not both.

In a planning obligation structure, the practical effect is that the public body’s acquisition from the developer may be relieved. This matters because, commercially, the public body may pass that tax cost back to the developer. So although the relief is claimed by the public body, the economic benefit may fall on the developer.

The timing and documentation are especially important. For planning obligations relief, there must already be an enforceable planning obligation against the seller before the transfer happens. A transfer that simply fits with the planning background, but is not required by an enforceable obligation, will not qualify on the WRA guidance.

How to analyse it

When considering compulsory purchase relief, ask these questions:

• Who is the buyer in the transaction for which relief is claimed?
• Did that buyer make the compulsory purchase order?
• Is the acquisition by way of that compulsory purchase order?
• Is the acquisition to facilitate development by someone else, rather than by the authority itself?
• Is the relief being claimed only for the authority’s acquisition, rather than for a later onward transfer?

When considering planning obligations relief, ask:

• Is there a planning obligation within section 106, or a qualifying modification of one?
• Was that obligation already in place before the transfer?
• Is it enforceable against the seller?
• Is the buyer one of the listed public bodies, or otherwise specified by regulations?
• Is the transaction taking place within five years of the obligation being entered into, or of the latest modification?
• Is the transfer actually being made to comply with that obligation?

In both reliefs, it is important to identify the exact chargeable transaction. Large developments often involve several contracts, transfers and public law steps. Relief may apply to one step but not another.

Example

Illustration: A developer needs several parcels of land for a scheme. One owner will not sell. The local authority makes a compulsory purchase order to facilitate the developer’s project. The authority acquires the land from the owner under that order and later transfers it to the developer. On the WRA guidance, the authority may claim compulsory purchase relief on its own acquisition if the conditions are met, because it made the order and the development is by a third party. The later transfer from the authority to the developer is still subject to LTT in the usual way.

Illustration: A developer enters into a section 106 obligation requiring it to build a road and transfer it to the council. Once the road is completed, the land is transferred to the council within five years of the latest relevant section 106 agreement or modification. If the obligation is enforceable against the developer and the council is the purchaser, the council may claim planning obligations relief on that transfer.

Why this can be difficult in practice

The main difficulty is that these reliefs depend on the legal character of the transaction, not just on the commercial reality of the development.

For compulsory purchase relief, a common point of sensitivity is whether the acquisition is truly by way of the compulsory purchase order and whether the authority is acting to facilitate development by a third party. If the authority is itself the developer, the guidance says there is no relief. The fact that negotiations continue after the order is made does not by itself prevent relief, but the authority still has to be the buyer in the relevant transaction.

For planning obligations relief, the words “to comply with” and “enforceable against the seller” are important. It is not enough that a transfer is desirable, expected, or commercially linked to planning permission. The guidance indicates that there must be an actual enforceable planning obligation already in place. The five-year limit can also be easy to miscalculate where there have been one or more modifications. The period runs from the latest relevant date.

Another practical issue is that the guidance is not the same thing as the legislation. The legislation sets the legal test. The guidance explains how the WRA approaches it. Where the facts are unusual, careful comparison with the statutory wording is still needed.

Key takeaways

• Compulsory purchase relief only applies to the acquisition by the body that made the compulsory purchase order, and only where the development is by a third party.
• Planning obligations relief can apply when a public body acquires land or a facility from a developer to comply with an enforceable section 106 obligation or qualifying modification.
• Both reliefs are transaction-specific, condition-based, and sensitive to the exact legal structure and timing.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Technical Guidance on Land Transaction Tax Reliefs for Compulsory Purchase and Planning Obligations

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