Stamp Duty Land Tax and multiple dwellings relief

What is multiple dwellings relief and when is it available?

Stamp duty land tax (SDLT) is payable by the buyer on completion of the purchase of a property. There are various reliefs available and one which is sometimes overlooked is multiple dwellings relief (MDR). MDR should always be considered when buying more than one dwelling as it can result in considerable SDLT savings for a buyer. It is only available in respect of SDLT payable on residential properties.

MDR is available for a qualifying land transaction which has an effective date on or after 19 July 2011. It is available in a transaction which concerns:-

• At least two dwellings; or
• A single dwelling which is one of a number of linked transactions and the main subject matter of at least one of the other transactions is an interest in at least one dwelling.

Examples of when MDR can apply:-

• In the purchase of six or more dwellings in one transaction. A buyer can elect whether to treat the transaction as a commercial property transaction and use the commercial property SDLT rates or use the residential rates and MDR relief. The commercial rates of SDLT cannot be used in addition to MDR.
• The acquisition of a property with a self-contained flat provided that they are a separate dwelling which is a question of fact in every case. Interestingly, this will not trigger the higher rates of SDLT payable by buyers who already own residential property provided that the subsidiary dwelling is within the curtilage of the primary dwelling and accounts for no more than one third of the total value of the property.

Calculation of MDR

MDR is calculated as follows:-

Step 1 Total consideration / number of dwellings = average price per dwelling

Step 2 Calculate the SDLT due on the average price per dwelling

Step 3 SDLT due on the average price per dwelling x number of dwellings. If this figure is less than 1% of the total consideration, then the SDLT payable is deemed to be 1% of the total consideration.

An example of a calculation and the potential savings is as follows:-

A buys a replacement for his main residence which has a self-contained annex for £750,000.

• Without using MDR - the SDLT payable will be £27,500*
• Using MDR - the SDLT payable will be £17,500*

Other considerations

It is important to be aware that if the number of dwellings is subsequently reduced then the SDLT position must be revisited. This would happen for example if a self-contained flat is incorporated into the main dwelling so that there are no longer two separate dwellings.

MDR can be claimed retrospectively by applying to amend the SDLT return filed within 12 months of the filing date.

*amounts calculated disregarding the temporary reduction in SDLT applicable between 8 July 2020 and 31 March 2021.

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.