Spring Budget Stamp Duty Review

In the 2024 Spring Budget announcements we find an example of Cannon’s First Law of Stamp Duty which is that a relief or exemption from tax will be withdrawn once ordinary taxpayers start to take advantage of it thereby causing extra work for HMRC.

This was in relation to the announcement that multiple dwellings relief or “MDR” will be abolished from June 2024, viz:

“In relation to mixed-property purchases, the government has decided not to take forward any changes to the Stamp Duty Land Tax rules.  

In relation to Multiple Dwellings Relief (MDR), following the consultation, the government commissioned an external evaluation of MDR to assess whether the relief is meeting its original objectives of supporting investment in residential property and the private rented sector. The evaluation found no strong evidence that MDR supports these objectives. The government’s view therefore is that the relief no longer achieves its original aims in a cost-effective way and legislation will be introduced to abolish MDR with effect from 1 June 2024.”

The external evaluation apparently said that:

“Results from the evaluation show that 51% of the total number of MDR claims come from individuals buying properties for private use, which does not support PRS investment or housing supply. In fact, 53% of private individuals reported becoming aware of MDR after their decision to purchase. Private individuals tend to purchase high value properties (median value £940,000). HMRC experience is that individuals are particularly vulnerable to tax repayment agents who encourage the submission of incorrect claims to MDR, requiring enquiry action by HMRC.’

So the relief is to be abolished because 51% of claims are from individuals and a majority of them seem only to have become aware of the relief after purchase when prompted by claims companies who then burden HMRC with dodgy claims.

This is surely looking at the problem through the wrong end of the telescope. Solicitors and conveyancers should be encouraged to advise their clients properly at the start of the purchase process as to whether an MDR claim is available and then make the MDR claim in the SDLT return when there are reasonable grounds to do so. However, many solicitors and conveyancers are too frightened to do so because of the intricacies of the relief which they do not understand, and so either tell their clients that they do not advise on MDR or remain silent and allow their clients to fall into the clutches of the dodgy tax reclaim industry after the purchase of the property.

The solution to this, according to HMRC, is simply to take the relief off the table for everyone and thereby save HMRC from having to open enquiries into dodgy claims and thereby proving Cannon’s First Law.

Will MDR be abolished, though? Although the intention to abolish was announced, there are a couple of possible complications that may mean abolition does not occur. These are first, the possibility of a general election being called before the necessary statutory provisions are enacted and, second, the likely strong pushback by Tory backbenchers on behalf of private property purchasers of homes with granny annexes with such constituents being among their natural supporters.

However, if you want to be sure of taking advantage of MDR before it is due to be abolished, here are the transitional provisions: For contracts exchanged on or before 6 March 2024 (Spring Budget 2024), MDR will continue to apply, even where completion of the purchase takes place on or after 1 June 2024. This is subject to there being no variation of the contract after 6 March 2024. MDR will also continue to apply to contracts which substantially perform before 1 June 2024.