HMRC SDLT: SDLTM29945 – Relief for transfers involving multiple dwellings: The remaining consideration FA03/SCH6B/PARA5(7)

Relief for Transfers Involving Multiple Dwellings

This section of the HMRC internal manual provides guidance on the relief available for transfers involving multiple dwellings under FA03/SCH6B/PARA5(7). It explains the principles and concepts related to the remaining consideration in such transactions.

• Details the conditions under which relief can be claimed.
• Explains the calculation of the remaining consideration.
• Provides examples to illustrate the application of the relief.
• Clarifies the legal framework governing these transactions.

Understanding Relief for Transfers Involving Multiple Dwellings

Overview

This article explains how stamp duty land tax (SDLT) relief works when transferring multiple dwellings. Specifically, we’ll focus on how to calculate the remaining consideration for these transactions according to the relevant legislation.

Key Concepts

– Multiple Dwellings Relief (MDR): Relief available for property transfers involving more than one dwelling. This allows buyers to pay less in stamp duty compared to buying each property separately.
– Remaining Consideration: The portion of the total amount paid for the properties that is considered after certain deductions or relief claims.
– Total Consideration: The full price paid for all properties involved in the transaction before applying any relief.

The Calculation Process

To calculate the SDLT when transferring multiple dwellings, you need to follow specific steps. The approach is not just a simple application of rates, but involves several calculations.

Step 1: Calculate the Total SDLT Due

– Start by finding out what SDLT would be due on the total consideration as if there was no relief claimed.
– For example, if you are purchasing two houses for a total of £500,000, you would check the SDLT rates applicable to that entire amount without considering the relief for multiple dwellings.

Step 2: Determine Proportion for Remaining Consideration

– Once you have the total amount due, you will need to figure out how much of that total relates to the remaining consideration.
– The remaining consideration is calculated by looking at how much the remaining consideration forms as a part of the total consideration.
– For instance, if the total agreement is £1,000,000 and the remaining consideration is £300,000, then the proportion of the remaining consideration is £300,000 out of £1,000,000 or 30% of the total.

Step 3: Calculate SDLT on Remaining Consideration

– Take the total SDLT amount calculated in the first step and find the percentage that corresponds to the remaining consideration.
– If the total SDLT on the full £1,000,000 is £40,000, then the SDLT attributed to the remaining consideration of £300,000 would be 30% of £40,000, equating to £12,000.

Step 4: Add SDLT on Dwellings’ Consideration

– Lastly, to get the total SDLT due, you will add the SDLT calculated on the remaining consideration to the SDLT that is based on the apportionment for the dwellings involved.
– Suppose the total SDLT on the other dwellings is £28,000, then the total would be £12,000 (remaining consideration) + £28,000 (dwellings) = £40,000 total SDLT due.

Important Legislative References

When dealing with these calculations and relief claims, it’s vital to refer to the correct legislative documents. In this case, we look at the references given under FA03/SCH6B/PARA5(7), which governs the rules for multiple dwellings relief and calculates remaining considerations.

You can find further details about multiple dwellings relief and remaining considerations through these references:
– For linked transactions, refer to SDLTM29903.
– For transitional rules regarding transactions that take place after 1 June 2024, see SDLTM29902.

Example Illustration

Let’s clarify the calculation through a detailed example.

Suppose a buyer is purchasing three residential properties for a total price of £1,200,000. They are eligible to claim multiple dwellings relief. Here’s how the calculations would proceed:

1. First, calculate the total SDLT without any relief:
– Suppose the SDLT on £1,200,000 would normally be £54,000.

2. Calculate the remaining consideration:
– Assume that the remaining consideration for the last dwelling is £400,000.
– The proportion of the remaining consideration is £400,000 out of £1,200,000, which is approximately 33.33%.

3. Calculate the SDLT for the remaining consideration:
– Take 33.33% of the £54,000 total: 0.3333 * £54,000 = £18,000 for the remaining consideration.

4. Now, if the SDLT calculated for the other dwellings totals £36,000, you will total the amounts:
– £18,000 (remaining consideration) + £36,000 (dwellings) = £54,000 total SDLT due.

This example demonstrates how to apply the multiple dwelling relief and calculate SDLT effectively.

Important Changes Effective from June 2024

As indicated, significant changes to how transactions are taxed will occur starting from 1 June 2024. The abolition of MDR for transactions that complete on or after this date means buyers will need to be mindful of new regulations and calculations. Special transitional rules may still apply, particularly for linked transactions.

For more accurate information regarding these changes and how they affect transactions, make sure to consult the links provided earlier.

Additional Resources

Navigating SDLT can be complicated, particularly when it comes to multiple dwellings. The HMRC provides further guidance and updates on SDLT changes. It’s advisable to keep abreast of any new developments by checking the HMRC website regularly or consulting a professional to ensure compliance with the latest rules.

You can access more detailed information through:
– SDLTM29945 – Relief for transfers involving multiple dwellings: The remaining consideration FA03/SCH6B/PARA5(7).

This resource will give additional insight into relief scenarios, helping buyers and professionals make informed decisions during property transactions.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM29945 – Relief for transfers involving multiple dwellings: The remaining consideration FA03/SCH6B/PARA5(7)

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