Read the original guidance here:
HMRC SDLT: SDLTM29901 – Abolition of multiple dwellings relief for SDLT

Understanding the Abolition of Multiple Dwellings Relief for SDLT

Multiple Dwelling Relief (MDR) helps reduce the amount of Stamp Duty Land Tax (SDLT) that buyers pay when purchasing multiple residential properties in one transaction. However, important changes are coming. Starting from 1 June 2024, MDR will no longer be available for transactions that either complete or are significantly performed after this date.

Key Changes to Multiple Dwelling Relief

Here are the main points you need to know about the abolition of MDR:

• Effective Date: The abolition of MDR takes effect from 1 June 2024.
• Contracts Exchanged Before the Deadline: If you exchanged contracts on or before 6 March 2024, you will still be eligible for MDR, even if the completion happens after the deadline. This eligibility is valid as long as there are no changes to the contract after 6 March 2024.

Transitional Rules for Linked Transactions

There are special rules for transactions that are linked, meaning they involve a series of related purchases. If a purchase includes homes both before and after 1 June 2024, the rules differ depending on whether or not MDR was claimed on the earlier transactions. Here’s how it works:

• MDR Claimed Before 1 June 2024: If you claimed MDR for any properties you bought before the change, any subsequent purchases made after 1 June 2024 will be treated as separate transactions. This means they will not be linked to the previous purchases and won’t be able to claim MDR.

Interaction Between MDR and FA03 S116(7)

Before MDR was abolished, buyers had a choice. They could either claim MDR or apply the rules under FA03 S116(7). This rule states that if a buyer purchases six or more dwellings in one transaction, it is treated as a non-residential transaction for SDLT purposes. With the removal of MDR, this choice will not be available anymore.

• Purchasing Six or More Dwellings: If you plan to buy six or more homes in a single transaction after 1 June 2024, the transaction will automatically be treated as non-residential under FA03 S116(7). This means that the usual residential rates of SDLT will not apply.

Example Scenario

To illustrate these points, consider a hypothetical scenario:

A property investor exchanges contracts to purchase three homes on 1 March 2024. They are eligible to claim MDR as the contract was exchanged before the 6 March 2024 deadline. If they complete the purchase on 15 June 2024, they can still claim MDR because they exchanged contracts before the deadline.

Now, suppose the same investor also plans to buy another four homes in a single transaction on 20 June 2024. Due to the changes in the law, they will not be able to claim MDR on this new purchase. Instead, this transaction will be viewed as non-residential, allowing them to benefit from the SDLT rules under FA03 S116(7).

Important Points to Remember

As you navigate these new regulations, keep the following important points in mind:

• If you exchanged contracts on or before 6 March 2024, you can still claim MDR even if the completion occurs later.
• For transactions linked to those that took place before the abolition of MDR, the MDR claims will only be valid for completed transactions before 1 June 2024.
• After 1 June 2024, purchasing six or more dwellings in one transaction will result in non-residential treatment, making previous MDR options redundant.

Conclusion

The changes to MDR will impact how buyers approach property investments involving multiple dwellings. Understanding these regulations will be essential in planning future transactions.

Further Information and Support

For more detailed information, you can refer to the specific guidelines provided by HMRC, especially regarding linked transactions and the non-residential treatment of multiple dwellings. For any assistance, visit: SDLTM29901 – Abolition of multiple dwellings relief for SDLT.