Read the original guidance here:
HMRC SDLT: SDLTM29904 – Abolition of multiple dwellings relief for SDLT – Examples – Linked Transaction Transitional Rules

Understanding the Abolition of Multiple Dwellings Relief for SDLT

This article explains the rules regarding the abolition of multiple dwellings relief (MDR) for Stamp Duty Land Tax (SDLT). The focus is on how linked transactions are affected by this change.

Key Concepts of Multiple Dwellings Relief (MDR)

MDR was a tax relief that allowed buyers to pay a lower rate of Stamp Duty Land Tax when purchasing more than one dwelling in a single transaction. The abolition of MDR changes how buyers are taxed on transactions that involve linked purchases of multiple dwellings.

Linked Transactions Explained

A linked transaction refers to two or more transactions that are connected as part of the same deal. Understanding whether transactions are linked is important because it affects how tax is calculated.

Examples of Transactions Before and After Abolition

Example 1

Transaction 1: On 14 March 2024, an individual purchases 2 dwellings from the same vendor (this is before the abolition of MDR).

Transaction 2: On 14 June 2024, the same individual buys 2 additional dwellings from the same vendor (this occurs after the abolition).

Tax on Transaction 1

• The individual can claim MDR, resulting in tax being calculated at the lower rate.

Tax on Transaction 2

• MDR cannot be claimed for Transaction 2.
• This transaction is treated as separate from Transaction 1.
• Tax is calculated based on the regular residential rates, as specified in Section 55 of the Finance Act 2003.
• The buyer is eligible for a full nil rate band on Transaction 2, as it’s now a standalone purchase.

Example 2

Transaction 1: On 14 March 2024, an individual purchases 1 dwelling (pre-abolition).

Transaction 2: On 14 June 2024, the same individual purchases 2 more dwellings from the same vendor (post-abolition).

Tax on Transaction 1

• MDR cannot be claimed due to only purchasing one dwelling.
• Tax is calculated based on standard rates.

Tax on Transaction 2

• MDR cannot be claimed for Transaction 2.
• This transaction is still linked to Transaction 1.
• Tax must be recalculated for both transactions under the linked rules found in Section 55(1C) of the Finance Act 2003.
• Only one nil rate band applies for both transactions combined.
• If the linked transactions create additional tax requirements, the buyer must file another return under Section 81A of the Finance Act 2003.

Example 3

Transaction 1: On 14 March 2024, an individual buys 1 dwelling (pre-abolition).

Transaction 2: On 24 March 2024, the same buyer purchases a mixed property (shop with 2 flats) from the same vendor (pre-abolition).

Transaction 3: On 14 June 2024, the same buyer acquires another mixed property (another shop with 2 flats) from the same vendor (post-abolition).

Tax Calculation – Option 1: Claim to MDR Made

• Transaction 1: No claim to MDR applies (only one dwelling), and tax is calculated accordingly.
• Transaction 2: This is linked to Transaction 1, and although it involves mixed property, the buyer claims MDR. The tax is adjusted for both transactions based on their linked status.
• Transaction 3: No MDR claim is allowed. This is treated as an independent transaction. Tax is calculated as per the rules in Section 55 of the Finance Act 2003, allowing a full nil rate band for Transaction 3.

Tax Calculation – Option 2: No Claim to MDR

• Transaction 1: Similarly, no claim to MDR applies with tax calculated at residential rates.
• Transaction 2: This is linked to Transaction 1. The buyer opts not to claim MDR, which means non-residential rates apply to both transactions.
• Transaction 3: This is linked to Transactions 1 and 2. No MDR claim, and tax is calculated at non-residential rates across all transactions, with only one nil rate band available for all three.

Example 4

On 14 March 2024, a company agrees to buy 30 residential properties from one vendor as part of a single deal.

Transaction 1: The company completes the purchase of 15 of the properties before 1 June 2024 (pre-abolition).

Transaction 2: Completion of the remaining 15 properties takes place after 1 June 2024 (post-abolition).

Tax Calculation – Option 1

• Transaction 1: The company makes a claim to MDR, allowing tax calculation based on the first 15 properties.
• Transaction 2: No MDR claim is allowed. This transaction is treated as entirely separate from Transaction 1, hence it is taxed under the ‘6 or more’ rule found in Section 116(7) of the Finance Act 2003. The additional properties are taxed at the non-residential rate, benefiting from a full nil rate band on Transaction 2.
• If the company decides to change its approach for Transaction 1, it can amend its return, provided this is done within the permitted timeframe.

Tax Calculation – Option 2

• Both transactions could have the ‘6 or more’ rule applied at once. Tax adjustments may be necessary to accurately reflect the linked nature of the transactions, allowing the application of only one nil rate band across all 30 properties.