Relief for Off-Plan Transactions and Abolition of MDR from June 2024

Multiple dwellings relief and off-plan purchases

A special SDLT rule could allow an off-plan purchase to count as including a dwelling for multiple dwellings relief (MDR) even if the dwelling had not been built when the transaction became effective. This mainly mattered where a contract was substantially performed before construction started, but only if the contract itself required the seller to build or adapt the property as a dwelling. As MDR was abolished for most transactions from 1 June 2024, the point now mainly matters for older or transitional cases.

• The rule applied to genuine off-plan contracts for a building, or part of a building, that the seller was obliged under the contract to construct or adapt for residential use.
• If substantial performance happened before construction began, the transaction could still be treated as including an interest in a dwelling for MDR purposes.
• A simple purchase of land, even with planning permission or an intention to build later, did not qualify unless there was a clear contractual obligation to build or adapt.
• The key issues are whether MDR is still available, what the contract actually requires, when substantial performance happened, and whether construction had started by then.
• Evidence such as the contract terms, payment or possession arrangements, and the timing of construction works can be important in practice.

Scroll down for the full analysis.

Multiple dwellings relief and off-plan purchases: when an unbuilt dwelling can still count

This page explains a narrow SDLT rule that used to matter for multiple dwellings relief in some off-plan transactions. It deals with cases where a buyer commits to buy a building, or part of a building, that has not yet been built or adapted as a dwelling when the transaction becomes effective for SDLT. The rule can treat the transaction as including a dwelling even though construction has not started. That matters because, without this deeming rule, relief could fail simply because the property did not yet physically exist as a dwelling on the effective date.

What this rule is about

Multiple dwellings relief, often called MDR, was a relief for certain transactions involving more than one dwelling. One practical problem arose with off-plan purchases. A buyer might enter into a contract for a flat or other dwelling that the seller is required to build or adapt, but the contract might be substantially performed before the building work has even started. In SDLT, substantial performance can bring the effective date forward.

If the effective date arrives before construction starts, there is an obvious question: is the buyer acquiring a dwelling at that point, or only land and contractual rights? This rule answers that question for MDR purposes in a specific way.

It is aimed at genuine off-plan contracts where the contract itself requires the building or adaptation of the property for use as a dwelling or dwellings. It is not aimed at a simple land purchase where the buyer merely hopes or intends to build later.

What the official source says

The HMRC manual says that, for MDR purposes, the main subject matter of the transaction is treated as consisting of, or including, an interest in a dwelling if all of the following apply:

• There is a contract to buy a building, or part of a building, that is to be constructed or adapted under the contract for use as a dwelling or dwellings.
• The contract is substantially performed before construction of the relevant building or part of the building has started.
• The effective date is treated as the date of substantial performance under the SDLT rules listed in the legislation.

The manual also makes two important points.

• For this purpose, “contract” is broad. It includes any agreement, so long as it is not a lease.
• This is different from buying a plot of land, even land with planning permission, where there is no contractual obligation to construct a dwelling.

The source also notes that MDR has been abolished for transactions completing, or substantially performed, on or after 1 June 2024, subject to transitional rules.

What this means in practice

The practical effect is that an off-plan purchase could still be treated as involving a dwelling for MDR purposes even if, on the effective date, no dwelling had yet been built and construction had not begun.

This prevented the relief from failing purely because SDLT timing rules brought the effective date forward to a point before the dwelling existed physically.

But the rule only worked where the contract itself required the construction or adaptation of the building for residential use. That contractual obligation is central. If the buyer simply bought land and intended to build later, that was a different case. Planning permission on its own was not enough. Nor was a commercial expectation that a dwelling would be built. The obligation had to arise under the contract.

In other words, the rule looked through the timing problem created by substantial performance, but only in a defined off-plan setting.

Because MDR has now been abolished for most later transactions, this point mainly matters for older transactions and for cases falling within the transitional rules.

How to analyse it

A sensible way to approach the issue is to ask these questions in order:

• Is this an MDR case at all? Because MDR has been abolished for transactions completing or substantially performed on or after 1 June 2024, first check whether the transaction falls before that date or within any transitional rules.
• What exactly is being acquired under the contract? Is it a building or part of a building that the seller is obliged to construct or adapt for use as a dwelling or dwellings?
• Is there a real contractual obligation to build or adapt? This is the key dividing line. A mere purchase of land with development potential is not enough.
• When was the contract substantially performed? The deeming rule only matters if substantial performance occurred before construction of the relevant building or part began.
• Why is the effective date the date of substantial performance? The rule applies where the effective date is deemed to be that date under the specific SDLT provisions referred to in the legislation and manual.
• If those conditions are met, does the transaction then count as including an interest in a dwelling for MDR purposes? If yes, the fact that the dwelling was not yet built at the effective date does not by itself prevent that conclusion.

For conveyancers and advisers, the documentary position matters. The contract terms, the timing of any payment or possession giving rise to substantial performance, and evidence of when construction actually began may all be important.

Example

Illustration: A buyer exchanges contracts to buy two flats in a block that a developer is obliged under the contract to construct. Before any construction starts, the buyer pays enough or takes steps that amount to substantial performance, so the effective date for SDLT is brought forward to that earlier date. On that date, the flats do not yet physically exist.

In this situation, this rule can treat the main subject matter of the transaction as including interests in dwellings for MDR purposes. The buyer is not prevented from relying on the dwellings analysis simply because construction had not started by the effective date.

By contrast, if the buyer simply buys a plot with planning permission and intends to build two houses later, but the seller is under no contractual obligation to build them, this rule does not apply.

Why this can be difficult in practice

The main difficulty is often characterising the contract correctly.

Some arrangements look like off-plan purchases but are legally closer to land acquisitions with future development intentions. The source draws a firm distinction between:

• a contract under which the building or adaptation of a dwelling is required, and
• a purchase of land where a dwelling may later be built, but there is no obligation to do so.

That distinction can be straightforward in simple cases, but more difficult in mixed or staged development arrangements.

Timing can also be sensitive. The rule depends on construction not having commenced before substantial performance. In practice, parties may need to identify what counts as commencement of construction for the relevant building or part of the building, and to establish the sequence of events clearly.

A further complication is that this is an HMRC manual statement explaining the effect of the legislation. The legal answer ultimately depends on the statutory conditions being met. The manual is useful guidance, but it is not itself the law.

Finally, because MDR has been abolished from 1 June 2024 subject to transitional rules, many current questions are likely to be transitional rather than substantive. The first issue may be whether MDR is still in point at all.

Key takeaways

• This rule addressed off-plan purchases where SDLT substantial performance happened before construction began.
• If the contract required the property to be constructed or adapted as a dwelling, the transaction could still be treated as including a dwelling for MDR purposes.
• It did not apply to a simple land purchase with planning permission and an intention to build, where there was no contractual obligation to construct a dwelling.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Relief for Off-Plan Transactions and Abolition of MDR from June 2024

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