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HMRC SDLT: SDLTM29971 – Relief for transfers involving multiple dwellings: Example 2

Relief for Transfers Involving Multiple Dwellings: Example 2

This article provides guidance on how Stamp Duty Land Tax (SDLT) applies in the case of purchasing a block of flats. The example discussed involves a freehold purchase that includes both tenanted and untenanted flats.

The Scenario

In this example, a block of 10 flats is bought for £1.4 million. Here are the key details:

• The purchase price for the entire block is £1,400,000.
• Out of 10 flats, five are currently let on long-term leases (specifically, 99-year leases).
• The freehold is being purchased, meaning the buyer owns the entire property without a headlease involved.

Understanding the Transaction

This transaction qualifies for SDLT relief because it involves the acquisition of more than one dwelling. For SDLT purposes, the five untenanted flats are treated as individual properties.

Chargeable Consideration

The total consideration of £1.4 million is divided between the flats as follows:

• The consideration that is apportioned to the five untenanted flats is £1,250,000.
• The consideration attributed to the five tenanted flats is £150,000.

This apportionment is important because it helps determine the SDLT that applies to each group of flats.

Calculating Stamp Duty Land Tax

The process for calculating the SDLT due on the purchase is broken down into steps:

1. The chargeable consideration for the untenanted flats (£1,250,000) is divided by the number of flats concerned (5).
2. This calculation gives a value of £250,000 for each untenanted flat.
3. The SDLT applicable on each of these flats is calculated based on this individual value.
4. The total SDLT due for all five untenanted flats is then calculated by multiplying the individual liability by 5.

Applicable Rates

Since these flats are classified as additional dwellings, the higher SDLT rates apply. Further details on these higher rates can be found in SDLTM09730.

If any of the purchasers are not resident in the UK, then the non-resident SDLT rates may also come into play. More about these rates can be found in SDLTM09860.

Tax Situation for Tenanted Flats

The total consideration for the tenanted flats is determined differently:

• The total chargeable consideration for the transaction remains £1.4 million.
• Since the transaction is related to multiple dwellings (six or more), it can also be categorised as involving non-residential property under section 116(7) of the Finance Act 2003.

This classification can have an impact on how much SDLT is applicable and the calculation involved.

Summary of Key Points

To clarify, here are the main points regarding the transaction:

• The freehold of the block of flats includes both tenanted and untenanted properties.
• The transaction is recognised for SDLT relief since it involves multiple dwellings.
• SDLT is calculated separately for untenanted and tenanted flats based on their relevant chargeable considerations.
• Higher SDLT rates for additional properties apply.
• Purchasers who are non-resident may be subject to different rates.

This example illustrates the tax implications and considerations when purchasing multiple dwellings. Understanding how chargeable considerations are apportioned is essential for accurate calculation of SDLT. The distinction between tenanted and untenanted flats also affects the overall tax liability.