The Stamp Duty Holiday ends this month, but there will still be 'reliefs' in place for homebuyers; that allow them to play lower rates of SDLT in certain circumstances.
For example, First-time Buyers are eligible for a form of SDLT relief; and homebuyers purchasing multiple properties may be able to claim Multiple Dwellings Relief (MDR).
Conveyancing Executive Natalie Neil looks at MDR for Stamp Duty, discussing when it does and doesn't apply.
What is Multiple Dwellings Relief for SDLT?
Multiple Dwellings Relief (MDR) for Stamp Duty Land Tax (SDLT) is a relief that, as the name suggests, can be claimed when a qualifying taxpayer purchases more than one ‘dwelling’ in a transaction.
The MDR allows SDLT rates to be applied to the average value of the collective properties, instead of the total purchase price.
Am I eligible for Multiple Dwellings Relief?
A dwelling is defined as a house, flat or place of residence.
To be eligible for Multiple Dwellings Relief, your transaction must be of at least two dwellings, or be of a single dwelling IF it is part of a ‘linked transaction’.
How is a ‘dwelling’ defined for SDLT?
For the purpose of SDLT, a building is a dwelling if it is used as, suitable to be used as, or is being adapted for, a single dwelling.
For further clarification, please refer to HMRC’s SDLT multiple dwellings manual here.
What is a SDLT linked transaction?
Under SDLT, a ‘linked transaction’ is one where multiple property purchases are undertaken between the same buyer and seller.
Generally, the rate of SDLT is applied on the value of the collective properties in the linked transaction; this rate of tax is therefore potentially higher than that of an individual property.
However, the MDR applies and the rate of tax is charged by the average price of the dwellings.
When does Multiple Dwellings Relief not apply?
MDR does not apply to the transfer of a freehold reversion or head lease if one of the dwellings has a long lease (21 years or higher).
The chargeable tax rate for this type of freehold reversion/head lease, or any other non-residential property included within the purchase, is the normal rate without relief.
If the number of dwellings is reduced within 3 years of the initial transaction, then you may need to fill in an additional return and recalculate the tax due.
Do I have to pay the 3% SDLT Surcharge?
If you already own a home, there is a 3% SDLT surcharge which is chargeable upon purchase of any additional residential property. This does not include homes that are bought to replace current homes.
Does the 3% SDLT surcharge apply to mixed-use properties?
Properties bought in addition to a residential home that are mixed-use, i.e. they have a commercial use as well as residential, are exempt from the 3% surcharge. An example of a mixed-use property could be a residential flat situated above a corner shop.
In the full article, Natalie looks at whether an Annexe qualifies for multiple dwellings relief; and discusses how to claim MDR.
The full article can be read by clicking here.
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