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HMRC SDLT: SDLTM29979 – Relief for transfers involving multiple dwellings: Example 6

Understanding SDLT Relief for Transfers Involving Multiple Dwellings: Example 6

This article explains how Stamp Duty Land Tax (SDLT) relief applies when purchasing a property that contains multiple dwellings, using a specific example to illustrate key points.

The Transaction Overview

• A freehold building made up of six flats is bought for £1.2 million.
• At the time of the purchase, the flats are rented under Assured Shorthold Tenancies.
• Two years later, the tenancies end, and the new owner starts converting the building into a hotel.

Relevant Transactions

When the building was purchased, it qualified as a relevant transaction because:

• It involved acquiring more than one dwelling, specifically the ownership of six flats.
• The leases for these flats had a term of 21 years or less.

The total amount of stamp duty owed is calculated based on two key factors:

• The total consideration (purchase price) of £1.2 million.
• The number of dwellings involved, which in this case is six flats.

Stamp Duty Rates

Because this purchase includes multiple dwellings, the higher rate of tax applies. This is because the buyer is acquiring additional properties. More information is available regarding this higher rate at SDLTM09730.

In addition, if any of the buyers are not UK residents, non-resident rates of SDLT may also be applicable. More details can be found at SDLTM09860.

Conversion of the Property

When the purchaser begins conversion work on the property, which must start within three years of the purchase, the situation changes:

• The flats are no longer considered suitable for residential use.
• The change in use is treated as if it occurred immediately before the purchase.

This means that the transaction ceases to be classified as a relevant transaction. The tax owed is now determined solely by the amount paid for the property (£1.2 million) because it is no longer considered a residential property.

Additional Tax Requirements

Once construction work begins, the purchaser is responsible for taking further action:

• The buyer must submit another return to HMRC.
• Any additional tax owed must be paid within 30 days of starting the conversion work.

It is important to stay compliant with these regulations to avoid any penalties.

Summary of Key Points

• The purchase of multiple dwellings can lead to different tax rates and requirements.
• Conversion of a residential property into a non-residential property requires further action from the buyer.
• Timely submission of tax returns and payment of taxes is essential to remain compliant.

Relevant Links

• For more information on higher rate SDLT for additional dwellings, refer to SDLTM09730.
• For details on non-resident SDLT rates, visit SDLTM09860.