HMRC SDLT: MDR Abolished for Transactions Completing After 1 June 2024; Tax Calculation

Relief for Transfers Involving Multiple Dwellings: Tax Calculation Changes

The Multiple Dwellings Relief (MDR) for Stamp Duty Land Tax has been abolished for transactions completed or substantially performed on or after 1 June 2024, with certain transitional rules applying. The tax calculation involves determining the sum of tax payable on the consideration for interests in dwellings and any remaining consideration. This consideration must be apportioned fairly, and separate percentage rates are applied to each part before being combined. Special rules apply if the chargeable consideration includes rent or if market value substitutions or elections are made under specific Finance Acts.

  • MDR is abolished for transactions from 1 June 2024, with transitional rules.
  • Tax is calculated on the sum of interests in dwellings and remaining consideration.
  • Consideration must be apportioned on a ‘just and reasonable’ basis.
  • Separate tax rates apply to each part of the consideration and are then aggregated.
  • Market value substitutions or elections can affect chargeable consideration.
  • Normal provisions apply for transactions where the consideration includes rent.

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SDLT Relief for Transfers Involving Multiple Dwellings

This guide explains the Stamp Duty Land Tax (SDLT) process for transactions involving multiple dwellings. It covers how to calculate the tax payable when a property transfer involves more than one dwelling. Let’s break down the key ideas and principles involved in this process.

Understanding SDLT and Multiple Dwellings

Stamp Duty Land Tax (SDLT) is a tax you pay when you buy property or land over a certain value in England and Northern Ireland. When a transaction involves multiple dwellings, specific rules apply to calculate the tax accurately.

When is Relief Available?

Relief for multiple dwellings is available when you are transferring ownership of two or more separate dwellings. If the transaction is linked to other transactions, you must ensure you apply the rules correctly to each part. You can find more details about linked transactions in SDLTM29903.

How to Calculate the SDLT

The amount of tax that you have to pay is calculated based on the total consideration (the price paid) for the dwellings. This calculation includes two main components:

  • Consideration attributable to interests in dwellings
  • Remaining consideration (if applicable)

You will need to split the total consideration fairly, using a method that is ‘just and reasonable.’

Steps to Calculate SDLT

Here are the steps to calculate the tax:

1. Identify Total Consideration: First, establish the total consideration for the entire transaction. This is usually the purchase price agreed upon for the properties.

2. Apportion Consideration: Next, divide the total consideration into two parts:
– The portion that represents the value of the dwellings
– The portion that represents any remaining value, if applicable

3. Apply SDLT Rates:
– Calculate the SDLT applicable to the portion of the consideration attributable to the dwellings.
– Calculate the SDLT applicable to the remaining portion.

The tax rates for both parts may differ. Once you have calculated the tax for both sections, add these amounts together to find the total SDLT payable.

Chargeable Consideration

In some cases, the chargeable consideration can include the market value of the property involved in the transaction. This may happen if:

  • The property is substituted under FA03/S53
  • You elect to use a different method under FA03/SCH4/PARA5
  • You make an election under FA03/SCH15/PARA12A

These provisions allow for some flexibility in how the market value is treated during the transaction.

Including Rent in Chargeable Consideration

If the chargeable consideration includes rent, you will need to follow the rules set out in FA03/SCH5 to determine how much tax applies to the rental element. It’s important to ensure all components are accurately reported to avoid underpayment or overpayment of the tax.

Important Changes to MDR

It is essential to note that the Minimum Dwelling Relief (MDR) has been abolished for transactions that complete or substantially perform on or after 1 June 2024. This change comes with some special transitional rules that might still apply in certain situations. You can check the details through SDLTM29902.

These transitional rules can impact how the tax is calculated, particularly for linked transactions involving multiple properties. If you are involved in a transaction that may fall under this umbrella, it’s beneficial to keep informed of any updates and requirements.

Final Remarks on SDLT Calculations

Calculating SDLT for transfers involving multiple dwellings requires a clear understanding of how to break down the total consideration. Paying attention to how you attribute value to different components will ensure compliance and potentially reduce the amount of tax due.

Always keep accurate records of your calculations and any elections you make as part of your transaction. If in doubt, consult with a tax professional to ensure you meet all legal obligations.

Useful Links

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: MDR Abolished for Transactions Completing After 1 June 2024; Tax Calculation

View all HMRC SDLT Guidance Pages Here

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Written by Land Tax Expert Nick Garner.
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