HMRC SDLT: SDLTM29965 – Relief for transfers involving multiple dwellings: Further return where number of dwellings is reduced FA03/SCH6B/PARA6

Relief for Transfers Involving Multiple Dwellings

This section of the HMRC internal manual provides guidance on SDLTM29965, which addresses relief for transfers involving multiple dwellings under FA03/SCH6B/PARA6. It focuses on the procedure for submitting a further return when the number of dwellings is reduced.

• Explains the criteria for claiming relief on multiple dwelling transactions.
• Details the process for adjusting returns if the number of dwellings changes.
• Outlines the legal framework governing these transactions.
• Provides examples to illustrate the application of these rules.

Introduction to Relief for Transfers Involving Multiple Dwellings

This article explains the rules regarding a specific tax relief in property transactions that involve multiple dwellings. This guidance is particularly relevant for those involved in buying or selling residential properties. The section of law we will be discussing is under FA03/SCH6B, which deals specifically with circumstances where the number of dwellings in a transaction is reduced.

Understanding the Abolition of MDR

• From 1 June 2024, MDR (Multiple Dwellings Relief) will no longer apply to transactions that are completed or substantially performed on or after this date.
• There are special transitional rules in place during this period for linked transactions.

Key Elements of Relief under FA03/SCH6B

The relief under FA03/SCH6B can apply when three specific conditions are met:

• Relief is claimed: The first step is ensuring that the relief under FA03/SCH6B is being claimed for the transaction in question.
• An event occurs: After the effective date of the transaction (known as the ‘relevant period’), a particular event occurs that may affect the tax calculation.
• Tax implications of the event: If this event had happened prior to the effective date, more tax would have been payable, resulting in a need to reassess the original transaction.

Defining an Event

In this context, an ‘event’ can be understood as any change in circumstances or a shift in plans that impacts the nature of the transaction. However, it’s important to note that the onward sale of individual dwellings does not qualify as an event for these rules.

Examples of what might trigger an event include:

• If the property involved no longer includes dwellings. For instance, if a residential property is converted into a commercial space, it cannot be considered a relevant transaction anymore.
• If the number of dwellings included in the transaction decreases. An example would be merging two smaller flats into one larger one, which reduces the overall count of dwellings involved in the transaction.

The Relevant Period Explained

The ‘relevant period’ is the time frame during which the impact of the event is considered for tax purposes. This period is defined as:

• Three years from the effective date of the transaction.
• If applicable, the date on which the purchaser sells any of the dwellings to a person who is not connected to them.

For transactions that were mainly performed before the completion date, this relevant period starts on the day of substantial performance.

Recalculating Tax Due

If an event that impacts the number of dwellings occurs within the relevant period, a recalculation of the tax due is necessary. This recalculation will consider:

• The total consideration (or payment) given for the transaction.
• The number of dwellings remaining after the event has occurred.
• This includes considering any dwellings that might have been sold prior to the event happening.

Handling Additional Tax Payments

Should the recalculation reveal that more tax is owed, the purchaser has specific responsibilities:

• A further return must be submitted, reporting the new tax due.
• This return should be filed within 30 days of the event occurring.
• To submit the return, a letter should be sent to the Birmingham Stamp Office.

Effective Date of the Transaction

When referring to the effective date of the transaction, any mentions in FA03/SCH10 should now be considered as the ‘date of the event.’ Thus, the calculation of tax payable will be based on the rates that were in effect at the original effective date of the transaction.

Final Notes

Understanding the elements of tax relief under FA03/SCH6B is vital for anyone involved in property transactions that include multiple dwellings, especially when changes occur. By being aware of the trigger points and the timeline for submitting necessary documentation, purchasers can ensure they remain compliant with tax obligations while also benefiting from available reliefs.

For further information and more detailed examples, it is advisable to refer to the links provided in HMRC guidance or seek professional advice if needed to navigate these regulations effectively.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM29965 – Relief for transfers involving multiple dwellings: Further return where number of dwellings is reduced FA03/SCH6B/PARA6

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