Compulsory Purchase & Other Exemptions

Key facts

Compulsory purchases facilitated by a government body or local authority may qualify for SDLT relief.
Transactions by or on behalf of the Crown are generally exempt from SDLT.
Right-to-buy transactions benefit from a statutory discount, and SDLT is calculated on the discounted price.
Certain transactions for no chargeable consideration (e.g. gifts) are generally exempt.
An SDLT return may still need to be filed even when an exemption applies.

Overview of SDLT Exemptions

While SDLT applies to most land and property transactions in England and Northern Ireland, certain categories of transaction are fully or partially exempt. These exemptions recognise that specific types of purchase serve a public interest or involve government bodies that should not bear the tax.^[1]

The main exemptions covered here are compulsory purchase relief, Crown exemption, the right-to-buy discount treatment, and the general exemption for transactions with no chargeable consideration.

Compulsory Purchase Relief

Compulsory purchase orders (CPOs) are used by government bodies, local authorities, and certain statutory undertakers to acquire land for public purposes — such as infrastructure, housing, and regeneration projects.^[1]

SDLT relief is available for compulsory purchases that facilitate development. The key conditions are:

The acquisition must be made under compulsory purchase powers (or by agreement where those powers could have been used)
The purpose of the acquisition must be to facilitate development on the land
The acquiring authority must be a qualifying body (e.g. a local authority, the Homes and Communities Agency, or an urban development corporation)

Note: Not all compulsory purchases qualify for relief. The relief specifically targets transactions that facilitate development. If the acquisition is not for development purposes, normal SDLT rules apply to the consideration paid.

How the Relief Works

Where compulsory purchase relief applies, the acquiring authority does not pay SDLT on the transaction. If part of the consideration relates to non-qualifying purposes, relief may only apply to the qualifying portion.

Crown Exemption

The Crown — including government departments, the Scottish Government, the Welsh Government, and Northern Ireland departments — is generally exempt from SDLT on transactions carried out in an official capacity.^[2]

Crown exemption applies automatically — no claim is needed on an SDLT return
The exemption covers transactions by the Crown itself and by bodies acting on behalf of the Crown
Crown exemption does not extend to Crown-owned companies or public corporations that are separate legal entities

For example, a government department purchasing office premises for civil servants would be exempt. However, a government-owned trading company purchasing property would not automatically benefit from Crown exemption.

Right to Buy

Under the right-to-buy scheme, eligible council and housing association tenants can purchase their home at a discount. For SDLT purposes, the key point is that SDLT is calculated on the discounted price (i.e. the price actually paid), not the market value:^[1]

Scenario	Market Value	Right-to-Buy Discount	Price Paid	SDLT Based On
House purchase	£200,000	£87,200	£112,800	£112,800
Flat purchase	£150,000	£116,200	£33,800	£33,800

If the discounted price is below the residential SDLT threshold (£125,000 from 1 April 2025), no SDLT is payable. First-time buyers may also benefit from the higher first-time buyer threshold of £300,000.

Tip: Many right-to-buy purchases will fall below the SDLT threshold once the discount is applied. However, an SDLT return must still be filed if the transaction is notifiable (generally where the consideration exceeds £40,000).

Transactions with No Chargeable Consideration

Certain transactions where no money changes hands (or where the consideration is below the notification threshold) are exempt from SDLT:^[3]

Gifts of property for no consideration (subject to exceptions for connected persons and partnerships)
Transfers by operation of law (e.g. property passing under a will or intestacy)
Variation of a deceased’s estate within 2 years of death (where treated as if made by the deceased)

However, if the recipient assumes a mortgage or other debt as part of the transfer, that assumption of debt counts as consideration and SDLT may be payable on that amount.

Other Notable Exemptions

Several other specific exemptions exist in the SDLT legislation:

Exemption	Description
Diplomatic premises	Acquisitions by or for diplomatic missions and international organisations
Visiting forces	Acquisitions by or for visiting military forces under NATO agreements
Crofting community right to buy	Scottish crofting community purchases (subject to Scottish LBTT rather than SDLT)
Alternative finance arrangements	Sharia-compliant property finance structures where SDLT would otherwise be charged twice

Frequently Asked Questions

Is SDLT payable on a compulsory purchase order?

SDLT may still be payable on a compulsory purchase, but relief is available where the purchase is facilitated by certain public bodies. Where the acquiring authority exercises compulsory purchase powers, the transaction may be exempt or eligible for a reduced rate depending on the circumstances.

Are right-to-buy purchases exempt from SDLT?

Right-to-buy purchases are not fully exempt, but SDLT is charged only on the discounted price (after the right-to-buy discount is applied). If the discounted price falls below the SDLT threshold, no SDLT is payable.

What does Crown exemption mean for SDLT?

Government departments and the Crown are not subject to SDLT on property transactions carried out in their official capacity. This exemption applies automatically and does not need to be claimed on a return.

Do I need to file an SDLT return if the transaction is exempt?

It depends on the exemption. Some exempt transactions (e.g. gifts with no chargeable consideration below the notification threshold) do not require a return. Others, such as right-to-buy purchases, still require a return even if no SDLT is payable.

Sources

SDLT: compulsory purchase facilitating development relief — GOV.UK
SDLTM29900 – Exemptions and reliefs: Crown exemption — HMRC
Finance Act 2003, Section 73 — legislation.gov.uk