What is Multiple Dwellings Relief?
Stamp Duty Land Tax (SDLT) is a tax on any purchase of a property in England and Northern Ireland. There are some exemptions and reduced rates for this tax, and one such relief is Multiple Dwellings Relief or “MDR” – a reduction in SDLT if there is more than one dwelling in the purchase.
The calculation of the SDLT rates on multiple dwelling purchases, and what constitutes a ‘single dwelling’, are complex and best handled by an experienced tax lawyer.
In some cases, buyers are misled by advisers into claiming Multiple Dwellings Relief, in their SDLT return and they could then face an investigation from HMRC for tax avoidance or even tax evasion. On the other hand, buyers may discover that they were eligible for Multiple Dwellings Relief from SDLT only after their purchase, and seek to claim back their tax payment from HMRC.
What Is the definition of a “Dwelling” for MDR?
The Finance Act 2003 Schedule 6B gives this definition: ‘A building or part of a building counts as a dwelling if—
(a) it is used or suitable for use as a single dwelling, or
(b) it is in the process of being constructed or adapted for such use.’
Factors that are not clearly defined include: whether the dwellings must-have kitchen facilities, lockable connecting doors or separate utility metering. These variables can be relevant in claiming SDLT relief, or in defending your MDR claim to HMRC.
When Does Multiple Dwellings Relief Apply?
Multiple Dwellings Relief can apply to the purchase of two or more dwellings in a single transaction, or in a series of linked transactions.
This can represent significant tax savings if you are buying several properties at the same time, one large property that is divided into dwellings or a house with a granny annexe, for example. It can also save money for landlords buying properties ‘off plan’.
What Is a Residential Dwelling?
A building or part of a building counts as a dwelling if either
(a) it is used or suitable for use as a single dwelling, or
(b) it is in the process of being constructed or adapted for such use.
Land that is, or is to be, occupied or enjoyed with a dwelling as a garden or grounds is included as is land that or is to subsist for the benefit of a dwelling (FA 2003, Sch 6B, para 7).
This definition of ‘dwelling’ is based on, and for material purposes, is the same as the definition of ‘residential property’ in FA 2003, s 116 except that acquisitions of land where construction or adoption of a single dwelling has not yet commenced at the time of substantial performance can also be included (FA 2003, Sch 6B, para 7(5)).
HMRC published fresh guidance on the meaning of ‘dwelling’ at SDLTM00410 – SDLTM0430 on 1 October 2019 although in the author’s experience, HMRC tends to pick and choose whether to follow their guidance in enquiries and in tax tribunal appeal hearings according to whether or not the guidance supports their desired outcome in any particular case.
A recent tax Tribunal case Bewley Ltd v HMRC  emphasised that a bungalow that was not used as a dwelling at the date of purchase, whose radiators and pipework had been removed and with the presence of asbestos preventing any repairs and alterations, was not suitable for use as a dwelling.
Accordingly, the Tribunal held that not only did the 3% higher rates not apply to the purchase price of £200,000 but that SDLT was chargeable under Table B for the non-residential property at £1,000 and not the £1,500 paid by the appellant taxpayer under Table A.
What is a ‘linked’ Transaction Under SDLT?
A ‘linked’ transaction is one where a number of property transactions are carried out between the same buyer and seller (or persons connected with them).
Buyers should be aware that the value of all properties in a series of linked transactions is normally added together before the rate of SDLT is applied, carrying a potentially higher rate of tax than on the individual properties.
However, Multiple Dwellings Relief applies to ‘linked transaction’ properties to reduce the tax charged by taking the average price of each dwelling and only charging the rates applicable to that average price, representing legitimate SDLT savings for the buyer.
What is the 3% SDLT Surcharge?
If you are already a homeowner, there is a 3% SDLT surcharge on each additional residential property that you buy. Exceptions include buying a home to replace a current home (for example during a separation or divorce).
If the additional residential properties have a commercial element (eg flats above shops or residential properties with offices), they are exempt from the 3% SDLT surcharge.
How can Multiple Dwellings Relief be claimed for SDLT?
A conveyancing solicitor or property accountant will calculate your SDLT after applying for Multiple Dwellings Relief and make the claim within the land transaction return.
If you are claiming MDR after the purchase of the property, you will need to make an SDLT refund claim to HMRC within 12 months of the purchase.
Does an annexe or ‘granny flat’ qualify for multiple dwelling relief?
An annexe or “granny flat” qualifies for MDR if it is a “subsidiary” of the main dwelling. To be a “subsidiary” dwelling the annexe or granny flat must be on the same grounds as the main dwelling or attached to it and the main dwelling must be worth on a just and reasonable basis, at least two-thirds of the total purchase price of the two dwellings. The annexe or granny flat must also be a separate single dwelling in its own right and afford the means for the occupant to lead a private domestic existence.
How Patrick Cannon can help
Stamp Duty Land Tax is a very complicated area. If you are considering whether the 3% higher rates of SDLT apply or whether you can claim multiple-dwellings relief, contact Patrick Cannon below to ensure you don’t miss out on any possible relief.
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Frequently Asked Questions
Relief is available for the acquisition of two or more dwellings under FA 2003, s 58D and Sch 6B. The relief was originally intended to lower the SDLT cost involved in bulk purchases of residential property to improve the supply of privately rented housing although it is available whenever two or more dwellings are acquired, including where the main house is acquired with a granny annexe.
The relief operates by reducing the rate of SDLT charged on the acquisition of multiple dwellings which would normally be determined by the aggregate consideration so that it is related to the tax that would have been charged had the dwellings been acquired individually.
The relief should be claimed in the land transaction return (using the specific code “33” in the SDLT1). However, taxpayers are permitted to amend their return later on and make a claim for MDR if the claim was not made in their original return. Taxpayers have up to 12 months from the filing date of their original return to make the amendment.
The relief should be claimed in the land transaction return (using the specific code “33” in the SDLT1).
Taxpayers who have not claimed MDR in their original tax return have up to 12 months from the filing date of their original return to make the amendment to their return and file that with HMRC. The filing date is 14 days after the effective date of the property purchase.
Yes, it is.
In principle this should not affect a claim for MDR because the relief concentrates on the physical suitability for separate occupation and not its legality. HMRC’s published guidance at SDLTM00430 states that: “Legal Constraints – The property may be subject to legal conditions, including planning restrictions and restrictive covenants, whether public or private law, which inhibit use as a separate dwelling. These conditions will be a factor in considering suitability of use as a dwelling, although where these conditions are not being respected for any reason, actual use will prove more helpful than theoretical use.”
However, in my experience, HMRC will ignore their own guidance in tax appeal hearings about MDR when there has been a breach of planning permission and argue strongly that this invalidates the claim. Judges tend to not to place any great weight on this.
There is no maximum amount you can claim for multiple dwellings relief and it is simply a result of computing the applicable stamp duty based on the number of dwellings purchased. This is because the relief operates by reducing the rate of SDLT charged on the acquisition of multiple dwellings which would normally be determined by the aggregate consideration so that it is related to the tax that would have been charged had the dwellings been acquired individually.
The amounts of tax computed for each individual dwelling are then added together to arrive at the total tax payable. The saving will be the difference between what the stamp duty would have been on the total purchase price and the aggregate of the stamp duty calculated for each individual dwelling.
HMRC aim to process SDLT refund claims and make the payment by bank transfer within 15 working days. Be aware that they do not review the refund claim in detail at this stage and merely process the payment. The detailed check comes later within the 9-month enquiry period commencing with the date the claim is received so it would be prudent to set the refund aside until the 9-month enquiry period has passed hopefully without an enquiry being opened.
HMRC simply issue the refund into the nominated bank account and does not send a letter confirming that the claim has been successful. Some refund claims advisers inform their clients that they have confirmed with HMRC Stamp Taxes at the time the refund claim is made that the refund claim is valid and that no further checks into the repayment claim will be made. Such claims should be treated sceptically by clients as HMRC staff have no power to issue such a binding assurance.
Mixed-use can apply to an equestrian centre when it is run on a truly commercial basis and is not merely an amenity for the residents of the dwelling.
MDR can be claimed by checking the relief box in the SDLT return and using Code 33. Alternatively, a refund claim can be made following the property purchase by submitting a claim to HMRC to amend the SDLT return.
In principle, the higher rate applies whenever the purchaser either already owns another dwelling or the transaction involves two or more dwellings and the second or more dwellings involved in the transaction are worth more than one-third of the total purchase price of the transaction unless there is also an element of the non-residential property that is non-negligible.
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