HMRC SDLT: Example of SDLT Relief for Multiple Dwellings in Property Purchase
SDLTM29971 – Relief for Transfers Involving Multiple Dwellings: Example 2
This section explains the Stamp Duty Land Tax (SDLT) relief for transactions involving multiple dwellings, using an example of purchasing a block of 10 flats. The tax implications differ for tenanted and untenanted flats, and the relief considers the acquisition of more than one dwelling. The SDLT rates vary based on the number of dwellings and whether the purchaser is a UK resident.
- Purchase involves a block of 10 flats for £1.4 million.
- Five flats are let on 99-year leases; five are untenanted.
- Chargeable consideration is split: £1,250,000 for untenanted, £150,000 for tenanted.
- SDLT rate for untenanted flats is based on consideration divided by number of dwellings.
- Higher rate for additional dwellings applies; non-resident rates may also apply.
- Transaction involving six or more dwellings can be treated as non-residential property.
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Read the original guidance here:
HMRC SDLT: Example of SDLT Relief for Multiple Dwellings in Property Purchase
Relief for Transfers Involving Multiple Dwellings: Example 2
This guidance explains how stamp duty land tax (SDLT) applies when purchasing multiple dwellings and outlines the calculations needed for the transaction.
Scenario Description
Imagine you are purchasing the freehold of a block of 10 flats for £1.4 million. In this case:
- There is no headlease involved.
- Five of the flats are currently rented out and let on 99-year leases.
Understanding the Transaction
This purchase qualifies for SDLT relief because it involves taking over more than one dwelling. In this situation, the five flats that are not rented out (the untenanted flats) are included in the calculation.
Apportioning the Chargeable Consideration
The total price of £1.4 million must be divided between the untenanted flats and the tenanted flats. This is done to determine the SDLT that applies to each group of flats.
- Chargeable consideration for the untenanted flats: £1,250,000
- Chargeable consideration for the tenanted flats: £150,000
Calculating SDLT on Untenanted Flats
The next step is to calculate the SDLT owed specifically for the untenanted flats. Here’s how that works:
1. First, take the amount attributed to the untenanted flats (£1,250,000).
2. Next, divide this amount by the total number of flats involved, which is 5.
3. After you have that figure, multiply it by 5 to determine the total SDLT payable for the untenanted flats.
This method ensures that the tax is fairly allocated based on the price paid for each flat.
Applying the Higher Rate for Additional Dwellings
In this situation, the higher rate for additional dwellings applies because there are multiple properties involved in the transaction. The higher rate comes into play because you are not just buying one flat but multiple flats.
For more detailed information about the higher rate, you can refer to this guidance on higher rates.
Non-Resident Rates Consideration
Additionally, if any buyer in this transaction is not a UK resident, different SDLT rates may apply. These may affect the total tax liability based on residency status. To learn more about these non-resident rates, check out this guidance on non-resident rates.
Calculating SDLT on Tenanted Flats
Now, let’s look at how to calculate the SDLT on the tenanted flats:
1. The chargeable consideration for the tenanted flats is straightforward: it is the total amount paid in the transaction, which is £1.4 million.
2. Since you are dealing with six or more dwellings, the transaction can be treated as involving non-residential property. This affects how the tax is applied.
Key Principles Behind SDLT for Multiple Dwellings
To summarise the principles involved:
– Multiple Dwellings Relief: This relief allows for a more favourable taxation rate when purchasing more than one dwelling at the same time.
– Chargeable Consideration: This is the amount that is subject to tax. It must be allocated correctly between the different flats involved in the transaction.
– Higher Rate Tax: The higher rate of SDLT applies to purchases involving additional dwellings. This rate increases the tax due, compared to buying a single property.
Important Considerations
When engaging in a transaction involving multiple properties, buyers should be aware of various factors that can influence the tax rate and the calculation of SDLT:
– Number of Dwellings: The total number of dwellings plays a significant role in determining whether the higher rate tax applies and which exemptions may be available.
– Property Usage: Whether the properties are tenanted or untenanted can affect the chargeable consideration and overall tax due.
– Residency Status: The residency status of the purchaser is essential to ascertain the correct SDLT rates applicable to the transaction.
Always ensure to keep abreast of the current SDLT regulations and guidance to avoid surprises in your property transactions. Furthermore, consulting a tax advisor or legal professional can provide tailored insights relevant to unique situations.
Example Workings and Calculations
Let’s go through the calculations step-by-step to clarify the total SDLT owed in this example:
1. Chargeable consideration for untenanted flats: £1,250,000
– Number of untenanted flats: 5
– Amount per flat = £1,250,000 / 5 = £250,000
– Total SDLT calculation for untenanted flats = £250,000 * 5 = £1,250,000
2. Chargeable consideration for tenanted flats: £150,000
– Since the total transaction amounts to £1.4 million and involves six or more properties, treat it as a non-residential property.
These calculations help in understanding the SDLT obligations resulting from the purchase of multiple dwellings. It shows how important it is to separate the different types of properties and their usages when determining the proper tax treatment.
Final Notes on SDLT for Property Buyers
Buying property can be a complex process, especially when it comes to understanding SDLT and how it applies when multiple dwellings are involved. Are you a potential buyer? Here are some final points for consideration:
– Documentation: Keep all records of your transaction, as this will be needed for accurate SDLT reporting.
– Professional Guidance: Always consider seeking help from a property lawyer or tax professional to navigate the complexities of property transactions.
– Stay Informed: Rules and policies can change, so staying updated on any changes can help avoid unexpected costs.
This example illustrates both the application and the calculation of SDLT in the context of buying multiple dwellings, adhering to the relevant tax properties and regulations.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: Example of SDLT Relief for Multiple Dwellings in Property Purchase
