Read the original guidance here:
HMRC SDLT: Guidance on Tax Relief for Reduced Dwellings in Multiple Dwelling Transactions

SDLTM29965 – Relief for Transfers Involving Multiple Dwellings: Further Return When Number of Dwellings is Reduced

This guidance discusses what happens if you claim relief under the Finance Act (FA) 2003 when you are involved in a property transaction that involves more than one dwelling. We will explain the rules around making a further return if the number of dwellings in the transaction decreases after the completion or substantial performance of the deal. It also includes details about the tax implications when changes occur within a specified period.

Key Principles of Relief for Multiple Dwellings

When you claim relief under FA03/SCH6B for a transaction involving more than one dwelling, there are some important conditions to understand:

• Relief Claim: You must claim relief for a qualifying transaction which takes place during a specific timeframe.
• Relevant Period: This is the timeframe during which changes can affect your tax status regarding the transaction.
• Event Definition: An ‘event’ captures any change in circumstances but does not include the sale of individual dwellings.

When Does a Further Return Become Necessary?

If an event occurs during the relevant period, it might lead to a requirement for a further return. Here are the main situations that trigger this:

• If the transaction no longer involves any dwellings, it no longer qualifies as a relevant transaction.
• If the number of dwellings in the transaction is reduced. For instance, if smaller dwellings are combined into larger ones, making them fewer in number.

Understanding the Relevant Period

The ‘relevant period’ is the timeframe during which your transaction can be impacted by events. It is defined as:

• The time period up to three years after the transaction takes place.
• If the purchaser of a dwelling sells it to someone who is not connected with them, the relevant period ends on that date.

In situations where the transaction was significantly performed before it was officially completed, the relevant period starts from the date of that substantial performance.

Recalculating the Tax Due

When an event happens during the relevant period, it may require you to recalculate the tax owed based on the overall consideration given for the transaction. This includes:

• The complete amount paid for the subject of the transaction.
• The number of dwellings remaining after the event.
• Any dwellings that were sold before the event took place.

Tax Additional Payments

If after recalculating, you find that more tax is payable due to the event, you need to take action:

• You must submit a further return to HMRC.
• You should pay any additional tax owed within 30 days after the event occurs.

Submitting Your Further Return

Further returns required from the recalculation must be sent to the Birmingham Stamp Office. It should be done in writing and include the necessary details of the transaction. Make sure to follow the guidelines provided by HMRC when submitting your return.

Effective Date References

In the context of these guidelines, when you see references in FA03/SCH10 regarding the effective date of a transaction, these should be interpreted as referring to the date of the event that triggered the need for a further return.

Tax Calculation Basis

The additional tax chargeable is calculated according to the rates that were in effect at the original effective date of the transaction.

Important Notes on Changes

Keep in mind that the concept of an event is broad. It covers various scenarios such as changes in the arrangement of properties or even modifications to the transaction plan. However, it specifically excludes any transfer of ownership of individual dwellings that has been previously completed.

Understanding these aspects when dealing with multiple dwellings can significantly impact your financial obligations. If there are any uncertainties, consider seeking professional advice to ensure compliance with HMRC regulations.

This guidance covers major aspects concerning the reduction in the number of dwellings when a relief is claimed under the relevant legislation. By keeping track of these conditions, you can avoid any unnecessary tax liabilities or complications in your property transactions.