Read the original guidance here:
HMRC SDLT: Abolition of Multiple Dwellings Relief for SDLT from June 2024

Understanding the Abolition of Multiple Dwellings Relief for Stamp Duty Land Tax

This article explains the recent changes concerning Multiple Dwelling Relief (MDR) in relation to Stamp Duty Land Tax (SDLT). The key points include when the changes take effect, the eligibility criteria for purchasers, and the interaction between MDR and other regulations.

What is Multiple Dwellings Relief (MDR)?

Multiple Dwelling Relief (MDR) allows individuals who purchase more than one dwelling in a single transaction to pay a reduced amount of SDLT. Essentially, it allows buyers to consider the dwellings as a single purchase, thus reducing the amount of tax they would owe compared to buying each dwelling individually.

Key Change: Abolition of MDR

As of 1 June 2024, MDR will no longer be available for transactions that complete or reach a certain stage of performance after this date. It’s essential for buyers to understand this change and how it might affect their property purchases.

• For transactions completed before 1 June 2024, buyers can still claim MDR.
• If a buyer exchanged contracts on or before 6 March 2024, they will still be eligible for MDR, even if the transaction completes after that date. This is provided there are no variations in the contract after 6 March 2024.

What are Transitional Rules?

Transitional rules are in place for transactions that are linked. A linked transaction is when multiple transactions are related in a way that affects their SDLT treatment. Here’s what you need to know about these rules:

• If a buyer previously claimed MDR on a transaction that took place before the abolition, any subsequent transaction after the change that involves the purchase of dwellings is no longer linked. This means buyers will have to pay the full SDLT rate on transactions completing or substantially completing after the change.
• For example, if a buyer purchased two properties before 1 June 2024 and claimed MDR, and then purchased another property after the change, they can’t link the two transactions for MDR purposes.

Interaction Between MDR and FA03 S116(7)

Before MDR was abolished, buyers had the option to choose between claiming MDR or applying FA03 S116(7). FA03 S116(7) enables the purchase of six or more dwellings in a single transaction to be regarded as a non-residential transaction for SDLT purposes.

• Once MDR is no longer available, buyers will not have the option to choose between MDR and FA03 S116(7). There will be a definitive application of the rules.
• When purchasing six or more dwellings in one go, the transaction will automatically be treated as non-residential under FA03 S116(7). This means the buyer will follow the non-residential SDLT rates and rules.

Examples of Transitional Application

To clarify how these changes work, here are a couple of examples:

• Example 1: A buyer enters into a contract to purchase three dwellings on 5 March 2024. They complete the purchase on 15 June 2024. Since they exchanged contracts before 6 March 2024, they can still claim MDR, even though the completion occurred after the abolition date.
• Example 2: A buyer purchases two properties before 1 June 2024, claiming MDR. Then, they go on to purchase a third property on 10 June 2024. Since the last purchase occurred after the abolition of MDR, and because the previous transactions cannot be linked per the transitional rules, they will need to pay the full SDLT rate on the new property without any relief.

Ensuring Compliance and Understanding Tax Responsibilities

As these changes take effect, it’s important for purchasers to ensure compliance with the new rules. Understanding the implications of MDR’s abolition will require careful consideration of how properties are purchased:

• Check Contract Dates: Always pay close attention to the dates of contract exchange and completion. This can greatly affect your eligibility for MDR.
• Understand Linked Transactions: Be aware of how linked transactions are treated under the new rules to avoid unexpected tax liabilities.
• Consider Non-Residential Rules: If purchasing multiple properties, know how the non-residential transaction rules under FA03 S116(7) apply, especially as the relief is no longer available.

Further Information and Resources

For more details on specific transactions or to clarify your obligations under these new rules, you may find it helpful to consult further resources or professional advice. You can explore the HMRC guidance on topics related to SDLT and MDR to ensure that all aspects of your property purchase are covered effectively.

Where to Find Help

If you have questions about how these changes might affect your purchases or if you need assistance navigating the SDLT regulations, consider reaching out to:

• A qualified tax advisor or accountant familiar with property transactions.
• Legal advisors who can help review your contracts and clarify your rights.
• HMRC customer service for official guidance and support on SDLT matters.