Read the original guidance here:
HMRC SDLT: Abolition of Multiple Dwellings Relief for SDLT: Linked Transactions Guidance

Abolition of Multiple Dwellings Relief for SDLT (1 June 2024): Linked Transactions

The abolition of Multiple Dwellings Relief (MDR) will affect land transactions with an effective date on or after 1 June 2024. For clarification, the effective date is when the transaction becomes legally binding.

Understanding Transitional Rules

There are specific transitional rules that address linked transactions. These rules help identify which transactions are still eligible for MDR, referred to as pre-abolition transactions, and which ones have lost their eligibility, known as post-abolition transactions.

What Are Pre-Abolition Transactions?

Pre-abolition transactions are those that:

• Complete or substantially perform before 1 June 2024, or
• Involve contracts exchanged on or before 6 March 2024, as long as they are not excluded transactions (see SDLTM29902).

Essentially, if the transaction is finished or mostly completed before 1 June 2024, or if the contract was signed by 6 March 2024, it qualifies as a pre-abolition transaction.

What Are Post-Abolition Transactions?

Conversely, post-abolition transactions refer to those that would have been relevant for MDR purposes but are no longer eligible because they complete or substantially perform on or after 1 June 2024.

Linking Pre-Abolition and Post-Abolition Transactions

When pre-abolition transactions are linked to post-abolition transactions, and all of these transactions would have qualified for MDR if the relief had not been abolished, the following rules apply:

• A claim for MDR is only available for the pre-abolition land transactions.
• If a claim is made for any of the pre-abolition transactions, the post-abolition transactions, while still linked, are considered to no longer be linked to any of the pre-abolition transactions.

This means that once a claim for pre-abolition transactions is made, the linking status changes. The transactions are treated independently, and the purchaser can benefit from a full nil-rate tax band on the first post-abolition transaction. The relevant rates for Stamp Duty Land Tax (SDLT) will apply, as outlined in section 55 of the Finance Act 2003, and will consider any possible surcharges.

Examples of Transitional Rules in Action

For better understanding, let’s look at a few examples of how these transitional rules function concerning linked transactions that happen before and after the abolition of MDR.

Example 1: No Claim Made

Imagine a situation where a purchaser has two transactions:

• Transaction A: A purchase completed on 15 May 2024.
• Transaction B: A purchase that completes on 10 June 2024.

Here, Transaction A is a pre-abolition transaction, while Transaction B is a post-abolition transaction since it occurs after 1 June 2024. In this case:

• The purchaser can claim MDR for Transaction A.
• Transaction B does not qualify for MDR, as it is after the abolition date.

Example 2: Claim Made

In another case, let’s consider the following transactions:

• Transaction C: A purchase where contracts were exchanged on 1 March 2024 and completed on 25 May 2024.
• Transaction D: A purchase that completes on 5 July 2024.

Here, Transaction C is a pre-abolition transaction because it was completed before 1 June 2024, and a claim for MDR is made on this transaction. Transaction D, however, is a post-abolition transaction. As a result:

• Since a claim for MDR is made on Transaction C, Transaction D is treated as if it is no longer linked to Transaction C.
• Therefore, Transaction D cannot take any benefits from the MDR.
• Nevertheless, the purchaser can utilise the full nil-rate band on Transaction D.

Example 3: Multiple Linked Transactions

Let’s expand the scenario with more transactions:

• Transaction E: A purchase completed on 30 May 2024.
• Transaction F: Contracts exchanged on 15 March 2024, completing on 10 June 2024.
• Transaction G: A purchase that completes on 20 July 2024.

Here:

• Transaction E qualifies for MDR, as it is completed before the abolition date.
• Transaction F is a pre-abolition transaction since the contract was exchanged before the key date, but it completes after.
• Transaction G is a post-abolition transaction, with completion after 1 June 2024.

If the buyer claims MDR on Transaction E, and given the linking rules, Transaction G will be treated separately, and the buyer may benefit from a full nil-rate band on Transaction G. Since Transaction F was not claimed, the transaction would still be eligible for MDR under the earlier claim.

Key Considerations

When dealing with linked transactions around the time of the MDR abolition, it is important to keep the following in mind:

• Identify whether transactions are pre- or post-abolition based on their completion dates.
• Understand the implications of making a claim for MDR on pre-abolition transactions.
• Anticipate how the changes may impact financial planning for any linked transactions.
• Seek additional advice where needed, especially in complex scenarios involving multiple transactions.

Final Note on Compliance

It is essential for anyone involved in property transactions to stay informed about these changes as they might significantly affect tax liabilities. Keeping abreast of updates from HMRC and seeking professional guidance can ensure compliance with the revised regulations surrounding MDR and SDLT.