Read the original guidance here:
HMRC SDLT: SDLTM29975 – Relief for transfers involving multiple dwellings: Example 4

Understanding SDLT Relief for Transfers Involving Multiple Dwellings

What is SDLT?

Stamp Duty Land Tax (SDLT) is a tax you pay when purchasing property or land in the UK. The amount you pay depends on the price of the property. SDLT has different rates depending on whether the property is residential or non-residential.

Relief for Multiple Dwellings

When you buy more than one dwelling, you may be able to apply for a relief called Multiple Dwellings Relief. This is a way to reduce the amount of SDLT you have to pay if your purchase involves several residential properties.

Example of How Multiple Dwellings Relief Works

Let’s look at an example to clarify how this relief is applied in a real-life situation.

Scenario

A buyer purchases a 999-year headlease over the following:

• Five flats
• Four lock-up shops

The total cost of this transaction is:

• Premium: £1.25 million
• Annual rent: £6,000

Out of the five flats, two are already occupied under separate 99-year underleases.

Identifying Relevant Transactions

This purchase is relevant for the Multiple Dwellings Relief because the buyer is acquiring more than one dwelling, specifically the three flats that are not rented out. The premium of £1.25 million is divided among the different categories of properties as shown below:

• Three untenanted flats: £750,000
• Two tenanted flats: £100,000
• Four shops: £400,000

Calculating SDLT on Untenanted Flats

To work out the SDLT due for the untenanted flats, you need to find the premium attributed to those flats:

• Total premium for the untenanted flats: £750,000
• Divide this by the number of dwellings (3 flats): £750,000 / 3 = £250,000

This means for SDLT purposes, the relevant amount is £250,000 per flat. The tax due will then be calculated on the £250,000 amount multiplied by the three flats, resulting in the total that needs to be assessed.

Understanding Higher Rates for Additional Dwellings

The higher rates for additional dwellings do not apply in this case because there is a significant non-residential component (the four shops) in the transaction. If you need more information about the higher rates, you can refer to SDLTM09730.

Non-Resident Rates

If any purchaser is not a UK resident, the non-resident rates of SDLT may be applicable to the residential part of the transaction. More details can be found in SDLTM09860.

Calculating SDLT on Tenanted Flats and Shops

Now let’s look at the tenanted flats and the shops. The tax for these is based on the total premium, which in this case is £500,000 (the total of the tenanted flats and shops). Because the purchase includes both residential and non-residential properties, the SDLT is calculated using the non-residential rates from Table B, section 55 of the Finance Act 2003.

Calculating Tax on Rent Payments

The calculation for tax on the annual rent that is payable under the lease follows the standard procedure. Again, if there is a non-UK resident buyer involved, they may be subject to the non-resident rates of SDLT for their portion of the purchase.