Stamp Duty Land Tax (SDLT) is a significant issue for developers seeking to maximise profit and the efficiency of their projects. Careful structuring can lawfully reduce exposure to SDLT and thus increase returns on developments and potentially make certain unviable developments viable.


Before the introduction of SDLT many developers structured their acquisitions using a model commonly referred to as either a “build licence scheme” or simply “resting on contract”. Developers entered into contracts with landowners to purchase the land but instead of taking the transfer of the title, the developer would enter onto the land, develop it and sub-sell the plots to purchasers. The happy result was no stamp duty for the developer.

The introduction of SDLT stopped these types of contractual arrangements due to the creation of a new concept of substantial performance. Where a contract is substantially performed by either paying the majority of the purchase price or by the purchaser taking occupation (which can be achieved by the grant of a build licence), SDLT becomes payable on any consideration being given by the developer under the contract of sale.

A great deal of thought was given to ways around this but the initial plans and ideas prevented the developer from being able to manage and control the sales of plots and commercially the risks were just too significant for the developer to be able to contract in this way.

SDLT Efficiency

However, a number of ideas have been developed further to address the commercial concerns of developers and still save SDLT.

In order to structure a development in an SDLT-efficient manner, the developer will need to pay careful attention to the agreed structure and ensure that each step is fully and properly executed. Professional advice throughout the development is therefore a good idea. Further it will be necessary to match the proposed structure to the structure of the development as only some developments are suitable for SDLT-efficient structures. Professional advice at the very inception of any possible development/site acquisition can identify whether an SDLT-efficient structure is suitable. The cost of such professional advice is often minimal if the there is no suitable structure and usually insignificant compared to the SDLT ‘saving’ where it is possible to structure the development in an SDLT-efficient manner.

Four Potential SDLT Planning Measures To Consider

1. Prudential Planning

This method takes its name from a recent case which involved Prudential. While this case pre-dates SDLT, HMRC has confirmed that the methodology remains current and can be used where applicable.

This methodology is mainly used in circumstances where a developer (A) has decided to sell part of a site to another developer (B) and where there are common infrastructure works.

In essence the land sale is agreed at a lower price and SDLT is payable on that amount. Once the sale has completed, the developers enter into an agreement whereby a sum is paid by B to A in respect of the infrastructure works which will benefit B’s land. The timing and drafting of the agreements has to be carefully managed to comply with the ‘prudential principles’ and to ensure that the transaction between the parties affords each of them the necessary commercial certainties, but we have successfully advised a number of developers to minimise some of the SDLT which would otherwise have been payable. Such savings have typically run into tens of thousands.

2. Joint Venture Planning

The principles of this planning are very similar to the old build licence planning which was widespread before the introduction of substantial performance.

Many practitioners looked at ways that the build licence scheme could be resurrected post-Finance Act 2003 and, while the technical basis of the planning was usually pretty sound from an SDLT perspective, because the developer often could not control the sales to plot purchasers the scheme was often thought to be unworkable and many advisers and developers just abandoned the idea. However, it is possible, with very detailed contracts, to overcome the issue of the lack of control and for there to be a high level of certainty that SDLT can be ‘saved’. The exact provisions required are project-specific and, where bank finance is being obtained, additional provisions need to be included.

We have developed a methodology jointly with a leading tax barrister at Gray’s Inn Tax Chambers which allows for:

a) An upfront payment to the selling landowner and a deferral of their CGT.b) First legal charges to be taken by the developer which can be assigned to the bank to secure all payments and work in progress.c) The developer to hold legal title (but as the issues are extremely complex and we only advise this if doing so is an unalterable requirement of the bank). d) The developer to have proprietary rights to sale proceeds, collection of the same, and power to control, market and direct all sales of land to plot purchasers and to be party to the sale contracts to plot purchasers.

3. Build Lease Planning

This is essentially most suitable when the developer is building for the seller as part of the consideration, and works especially well when the respective land parcels are adjoining. This structure has been used when large works have been undertaken for sellers like Network Rail as part of a development scheme. The developer is granted a lease over the entirety of the site and builds on the land demised under the lease. The planning must be implemented with careful thought not only as to SDLT but also other taxes such as VAT and capital allowances. It works by relying on the works exemptions to Schedule 4 of the Finance Act 2003 and in this strategy has been notified to HMRC which accepted that the principles used are effective. We have also recently discussed the planning with tax counsel who did not think it was affected by the general anti avoidance rules. The structure does not generally avoid SDLT on the entirety of the transaction but does keep the value of any works completed for the seller out of the scope of the duty.

4. Developers’ Part Exchange Planning

Again, this planning works for residential developers who are likely to be buying a large residential plot and building a home for the seller in part exchange for the site. It relies on both the developers’ part exchange exemptions and the sale and leaseback rules which do not appear to be mutually exclusive. The planning will only work where all the conditions for both reliefs apply, but it does mitigate all the SDLT otherwise payable and is useful as often these developers would otherwise be subject to SDLT at 7%.


SDLT efficiency should be actively considered at the initial planning stages of a development or site acquisition as careful planning can greatly increase return on investment in suitable circumstances.

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This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.