Read the original guidance here:
HMRC SDLT: Overview of Multiple Dwellings Relief and Changes Effective from June 2024

Overview of Relief for Transfers of Multiple Dwellings

This article explains the relief available for transfers involving multiple dwellings under Stamp Duty Land Tax (SDLT). The relief is called Multiple Dwellings Relief (MDR) and offers potential savings for purchasers who buy more than one dwelling at once.

Key Information about MDR

• The MDR will be abolished for transactions that are completed or where significant performance occurs after 1 June 2024. There are special transitional rules that may apply.
• Details about these special rules for linked transactions can be found at SDLTM29903.
• To determine the SDLT rate for transactions eligible for relief, the total consideration for the dwellings is divided by the number of dwellings purchased. This gives the average consideration for each dwelling.
• There is a minimum rate of 1% that applies to this average consideration, meaning that relief cannot bring the rate lower than this.
• Purchasers can choose whether to claim the relief; it is not automatically applied. If a buyer decides to purchase six or more dwellings in one go, they might opt to apply Finance Act 2003 Section 116(7). This allows the transaction to be treated as non-residential for SDLT purposes. Buyers can select the option that is most beneficial for their SDLT payment.

Possible SDLT Rates

• The SDLT rate for the part of the purchase price related to non-dwelling properties will remain the same as it would have been without the relief.
• Superior freehold or leasehold interests in dwellings that come with leases lasting 21 years or longer are mostly not eligible for this relief, except for specific shared ownership scenarios detailed in schedule 6B, paragraph 2(7).

Off-Plan Purchases

Off-plan purchases are also included in the relief provisions. An off-plan property is one that is meant to be constructed, but where construction has not yet started at the time the contract is substantially set up. This type of purchase differs from acquiring just bare land that has planning permission but no requirement to build a dwelling.

Adjusting Tax Calculations

If the number of dwellings involved in the purchase decreases within three years of the effective date of the transaction, the tax calculation can be adjusted accordingly.

Higher Rates of SDLT for Additional Residential Properties

• If a purchase of multiple dwellings triggers the higher SDLT rates because the buyer owns other residential properties, it can still qualify for multiple dwellings relief. However, the average consideration will be adjusted based on the higher rates applicable.

Non-Resident Rates of SDLT

• Foreign buyers who purchase multiple dwellings and are subject to the higher SDLT rates will also still be eligible for multiple dwellings relief. Again, the tax rate applied will factor in both the non-resident rates and any additional residential property rates.

Deciding Whether to Claim Relief

Purchasers must actively decide whether to claim multiple dwellings relief. There may be circumstances where claiming relief is beneficial, especially if purchasing multiple properties. However, it is important to consider the specific details of the transaction to ensure the best financial outcome.

Example of Relief Application

For example, if a buyer purchases three dwellings for a total of £600,000, the average consideration per dwelling would be:

• Total consideration: £600,000
• Number of dwellings: 3
• Average consideration per dwelling: £600,000 / 3 = £200,000

In this case, the SDLT rate would apply as follows:

• If the average consideration per dwelling does not go below the minimum rate of 1%, the buyer will pay SDLT on the average consideration.

Understanding Transactions and Their Completion

Transactions are considered complete or significantly performed when all necessary actions to transfer ownership have occurred, such as the exchange of contracts. Purchasers should be aware that timing can affect their eligibility for the relief and the rates that apply. Thus, understanding when a transaction is completed is key.

Need for Professional Advice

Given the complexities surrounding SDLT and the potential savings from MDR, it is often beneficial for purchasers to seek professional advice. Real estate agents, financial advisors, or solicitors with expertise in property transactions can provide clarity on whether claiming relief is the best course of action and how to navigate the SDLT implications effectively.

Summary of Transactions Eligible for Relief

• Purchases that involve multiple dwellings.
• Transactions where the average consideration exceeds the minimum tax rate.
• Conditions where off-plan purchases meet the defined criteria.
• Situations involving changes in the number of dwellings within three years post-transaction.

In summary, prospective buyers of multiple dwellings should thoroughly evaluate their transactions against the criteria for Multiple Dwellings Relief to ensure they are optimising their financial positions when it comes to SDLT payment.