In the recent Budget Statement, it was announced that the Multiple Dwellings Relief will be abolished. However, for transactions completing before 1 June 2024, the relief will still apply. Additionally, if the exchange took place before 6th March, the relief will be available even if the transaction completes after 1st June. It’s important for individuals to be aware of these key changes in order to plan their property transactions accordingly. Call us now to discuss further on 03300 887 912

Multiple Dwellings Relief | SDLT Linked Transactions

Stamp Duty Land Tax is an tax for buying and selling properties in England and Northern Ireland. There are exemptions and low rates for this tax which are also known as Multi-Dwelling relief.

The calculation of the SDLT rates on a number of dwelling purchases is complicated and best managed through a qualified tax lawyer if possible. In some instances the buyer has received a misinformation from a tax adviser that a buyer can claim multiple dwelling – relief.

While buying and selling properties in the UK, it is worth knowing about the available tax reliefs that you can use to offset your property tax burden on multiple property transactions together.

One of the most common property investors’ questions is about Stamp Duty Land Tax (SDLT) and its impact when you purchase multiple properties in a single transaction.

The calculation tax payment of SDLT on claiming multiple dwellings relief can be complicated. However, this blog decodes what SDLT is, how you become eligible claim multiple dwellings relief, and ways to claim Multiple Dwellings Relief to reduce your SDLT tax burden.

What Is the definition of a “Dwelling” for MDR?

A building or a portion of a building can be regarded as housing Its use may be used as a house. This product can be built or modified to the intended purpose.

The fact that the residence is lacking in a clear definition includes whether they have kitchen units or separate power meters. This variable is relevant when defending a MDR claim or claiming SDLT restitution from the Government.

When does MDR apply?

There is an exception to a single dwelling transaction in which a two dwelling is involved. They are either linked transactions or the same transaction for the same transaction. Generally it doesn’t apply in a single case, it requires a claim.

Does multiple dwellings relief apply with non-residential property included?

A buyer has the option of treating the transaction as commercial property transactions and using the commercial property SDLT rates or using the commercial rates and MDR relief. SDLT commercial rates are not included in MDR.

Does an annexe or ‘granny flat’ qualify for multiple dwelling relief?

Annexes or “granny apartments” can be eligible to qualify as MDRs if they are “sub-units of main residence”. To be a “subsidiary” dwelling, the annexe or granny flat must be on the same grounds as the main dwelling or attached to it, and the main dwelling must be valued on a just and reasonable basis, at least two-thirds of the total purchase price. The annex and granny house must be in addition separate one-room houses which allow the occupants to live in private homes.

What Is a Residential Dwelling?

A structure or parts of a construction are considered a building when both are considered as dwellings. It has the capacity to serve as a single dwelling. (b) it is currently being constructed or modified. Land which can be used in a garden or for a home, as a garden or for an area is considered the same land which will exist or which is intended in its use.

Continue reading this guide to answer all your queries.

How are dwellings classified?

Before we talk about the eligibility for Multiple Dwellings Relief and ways to claim it, let’s start with the basics and define what a ‘dwelling’ is classified as in multiple dwelling relief (MDR).

For the purposes of MDR, a dwelling is a building or separate from more than one dwelling, or a part of a building more than one separate from more than one separate dwelling, which could be a house or flat, when:

• It is suitable to be used as a single dwelling, or
• It is being constructed for such use.

Examples of these include the land that comes with selling property for these multiple dwellings relief including a separate garage main house, lawn, etc suitable for use as multiple dwellings.

What are Multiple Dwellings?

When someone buys more than one such residential dwelling in a single land transaction return or linked transaction for more than one single dwelling, they are said to invest in multiple dwellings or in linked transactions or transaction for mixed use property again.

Multiple dwellings are known by several other names such as ‘attached holiday let’, ‘granny annexe’, or ‘granny flat’. More than one are multiple dwellings which are two or more dwellings, or multiple dwellings relief more than two are multiple dwellings relief which include residential properties:

• Apartments, flats, holiday cottages, or houses bought at the same time.
• Purchasing a house with a self-contained annexe.
• Buying a mixed-use property (For example, a flat with a shop above).
• A bigger property converted into two or more dwellings.

This relief is normally applicable to:

• Developers who buy multiple properties for the purpose of redevelopment or renovation.
• People construct annexes for letting them out for additional income or as residences for family members. These annexes could also be used for letting out to students.

What is Multiple Dwellings Relief?

A person buying residential accommodation with multiple dwellings in one transaction has a chance to reduce their tax bill with Multiple Dwellings Relief.

This tax relief was introduced by HMRC in 2011 to make investment and development in residential property more attractive, especially when the transaction includes multiple dwellings relief for multiple property purchases, or collective properties with at least two dwellings.

MDR reduces the Stamp Duty bill payable by the buyer. Multiple Dwelling Relief means that the stamp duty for purchasing multiple properties or multiple dwellings relief apply mixed use properties is calculated in a different way to offer tax relief to the individual property or owner purchasing the same multiple dwellings relief or mixed use properties.

How is SDLT Calculated on Multiple Dwellings?

Instead of calculating the stamp duty on the total price that the buyer pays for all the properties or the cost of each individual of property in total purchase price, it uses the calculation of the average value of all the properties.

Let’s make this calculation simpler for you to understand:

Step 1: Divide the total amount paid for the properties by the number average price and number of dwellings, for multiple residential properties purchased.

Step 2: Calculate the SDLT due on this per dwelling figure.

Step 3: Multiply the SDLT tax amount by the number of dwellings, residential rates and average price of two dwellings purchased non residential property.

You can understand this better by this HMRC example:

You buy 4 houses for £1 million. The average purchase price of main house comes to £250,000. Stamp duty is not paid on the first £250,000. Since the minimum rate of tax under MDR is 1%, you will have to pay £10,000.

What are the Current Multiple Dwelling Relief Rates?

HMRC has laid down the suitable for use following relief rates:

• Minimum of 1% on the purchase price.
• 3% additional stamp duty on the purchase of residential property.
• Mixed-use properties are liable to pay commercial stamp duty rates. They are exempt from the 3% surcharge.

How To Qualify for Multiple Dwelling Relief?

Here’s how you qualify for this relief:

Number of properties

The qualifying condition for getting a multiple dwellings relief, dwelling relief is when a person purchases a multiple dwelling purchases two to construct dwellings, multiple dwellings relief or multiple dwellings relief applies anything between multiple and single dwelling or purchases two to five properties.

If the number of properties purchased are two or more properties rather claim multiple dwellings relief than more than one dwelling, or claim multiple dwellings relief rather subject more than one dwelling or six, they are understood to be for commercial purposes. In this case and other non residential property, the buyer qualifies for non-residential stamp duty land tax rates. These rates are lower than the residential rates and SDLT taxes.

Commercial rates of SDLT cannot be used alongside MDR.

Linked transactions

A linked transaction under SDLT is same transaction where the same seller and buyer undertake the same transaction or multiple linked transactions to sell or purchase a property.

Here is what constitutes a linked transaction:

• When the transactions are more than one.
• The property transactions either are done between the same buyer and seller or between people connected to them. These connected people could be brothers, sisters, parents, wives, husbands, etc. When the seller and buyer are businesses, the connected persons would be the partners in the business and their relatives.
• The transactions to buy or to sell property or the property are part of a series of transactions or part of multiple such property purchase transactions or of a whole single transaction arrangement.

Is Multiple Dwellings Relief Available for Non-Residents?

Yes, multiple dwelling reliefs may be granted to buyers purchasing multiple homes at higher rates for non-UK resident purchases. A tax rate of average value is determined by the non-resident rates and, when applicable, the rate payable for additional home ownership.

Can I claim multiple dwellings relief for off-plan property purchase?

This exemption covers purchases made off-plan unless the building or adaptations are not completed by the effective date of the transaction or. HMRC considers the term “off-plan” to refer to purchases for which the subject matter is a house to be constructed but construction is no longer being completed after contracting is substantially completed. It is different from buying land without planning permission but not necessary to create a residence. This MDR applies to former and none of the two.

How Can You Claim Multiple Dwelling Relief?

Multiple dwelling relief can help you potentially save thousands of pounds in stamp duty. This relief is claimed through a solicitor at the time of property purchase because of the additional residential property used.

In case, you missed the filing date or the effective date for claiming this relief and overpaid your stamp duty, it is possible to claim it in retrospect. You can do this up to a year from effective date of the filing date.

Claimants are asked to produce proof of total purchase price of non residential property included the dwelling or the multiple dwellings. These could be either the property floor plan, or a surveyor’s report.

Is Multiple Dwellings Relief Available for Non-Residents?

Yes, multiple dwelling reliefs may be granted to buyers purchasing multiple homes at higher rates for non-UK resident purchases. A tax rate of average value is determined by the non-resident rates and, when applicable, the rate payable for additional home ownership.

What property types are eligible for multiple dwellings relief, according to HMRC’s definition?

A home must be fully encased and contain a private entrance, kitchen, sleeping area and bathroom. It will be built on or before the MDR/SDLT translation date. How do you identify your subsidiary property?

When does MDR apply?

There is an exception to a single dwelling transaction in which a two dwelling is involved. They are either linked transactions or the same transaction for the same transaction. Generally it doesn’t apply in a single case, it requires a claim.

Summary
This blog provides basic details about Stamp Duty Land Tax and multiple dwellings, stamp duty land tax and tax relief introduced here, how it is calculated and how you can claim it. You must ensure that you don’t make any errors to avoid HMRC penalties and ensure you claim the right reliefs to minimise your stamp duty land tax and bill. For any individual, there is always a possibility of miscalculation where you end up overpaying or underpaying the stamp duty land tax.

This is why it calls for experts like us to help you process your tax relief seamlessly without leaving any scope for mistakes. Get in touch with us today to know more.