Read the original guidance here:
HMRC SDLT: SDLTM29940 – Relief for transfers involving multiple dwellings: Consideration attributable to interests in dwellings FA03/SCH6B/PARA5(1) – (6)

SDLT29940 – Relief for Transfers Involving Multiple Dwellings

Understanding Multiple Dwellings Relief

When buying several homes at the same time, you may qualify for relief from Stamp Duty Land Tax (SDLT). This rule is beneficial as it reduces the amount of tax you need to pay. The relief applies when you purchase two or more dwellings from one seller or as part of a linked transaction.

Steps to Calculate SDLT With Multiple Dwellings Relief

To arrive at the correct amount of SDLT due when purchasing multiple homes, you need to follow these steps:

1. Calculate Average Chargeable Consideration:
– First, determine the total chargeable amount you have given for all the homes.
– Then, divide this total figure by how many homes you are buying. This will give you the average price for each home.

2. Compute the SDLT Due:
– Use the residential SDLT rates to figure out the tax due on this average amount. If your purchase meets certain criteria, you may need to apply higher rates.
– Multiply the tax amount for the average consideration by the total number of homes you are purchasing.

3. Adjust for Linked Transactions:
– If your transaction includes linked purchases, you will need to divide the SDLT among those transactions. This is done based on the share of the total amount each transaction represents relative to the overall consideration for the homes.

Special Cases and Minimum Tax Amount

In some cases, your calculated SDLT might be very low. If the amount of tax due is less than 1% of the total consideration for the homes, then you will not receive the full relief. Instead, SDLT will be calculated as 1% of the total amount.

– Example: Suppose you buy three homes for a total of £300,000, with an average consideration of £100,000 for each home. If the SDLT calculated is £900, which is less than 1% of £300,000, you must pay £3,000 as the minimum tax.

This £3,000 is the tax specifically related to the dwellings. To get the full tax bill, this amount must be added to the SDLT calculation for other parts of the transaction.

For more details on calculating SDLT for other components of a purchase, refer to SDLTM29945.

Multiple Dwellings Relief and Non-Residential Rules

It is important to note that if you are claiming the multiple dwellings relief, then you cannot apply the rule that treats six or more dwellings as non-residential property, as outlined in FA03/S116(7). This means you should focus solely on the residential rates when calculating your tax.

Special Transitional Rules after MDR Abolishment

The Multiple Dwellings Relief (MDR) rules will change significantly after 1 June 2024. For transactions that are completed or substantially performed (as explained in SDLTM07850) from this date, specific transitional rules will take effect. More details on transitional rules concerning linked transactions can be found in SDLTM29903.

The Scenario of Linked Transactions

Linked transactions occur when you are making multiple purchases that fall under one arrangement. For instance, if you decide to buy three properties from a developer in a single deal, this may be viewed as a linked transaction.

– Example: You purchase a flat for £200,000 and two terraced houses for £150,000 each, giving a total of £500,000. The average price per home would be £166,667. If the SDLT calculated for that average price is below the 1% threshold based on the total consideration, then you will have to pay the minimum SDLT instead of the calculated lower amount.

Considerations for Non-Dwelling Elements

When buying multiple dwellings, it’s common to include some non-dwelling elements in the transaction, like garages or land. The calculations will need to carefully separate the SDLT on the dwellings from the SDLT on these other components.

– After finding out the SDLT due on the dwellings, you should add that figure to the amount due for any non-dwelling parts of the deal. This combined total will then be the amount of SDLT you need to pay.

Understanding the Importance of Accurate Calculations

Making sure you have calculated everything correctly is crucial to avoid any future issues with HMRC. Mistakes in your SDLT calculation could lead to penalties or extra taxes owed.

It is recommended to keep clear records of all transactions and related calculations. This documentation will be invaluable if HMRC requests clarification or if you need to support a claim for relief.

The Impact of Date of Transaction on SDLT

The date of your transaction plays a significant role in determining the SDLT due. If your purchase is undertaken after the new MDR rules take effect on 1 June 2024, be prepared for the changes that will occur.

– Example: If you have a purchase agreement that solidifies the day before the new MDR policy comes into effect, you can benefit from the existing rules. This often means you can calculate the SDLT based on the current lower rates and possibly gain maximum relief for multiple dwellings.

Final Note

Be aware that HMRC’s interpretation and application of these rules may change over time, and staying informed is essential. Regularly check their official guidance or consult a tax professional to ensure that you are compliant with the latest regulations.

For further assistance with SDLT or specific inquiries, referencing detailed cases such as SDLTM29940 can offer more in-depth understanding of how these rules apply to transfers involving multiple dwellings.