What is Multiple Dwellings Relief?
Multiple Dwellings Relief (‘MDR’) was introduced in 2011 and is a tax relief allowing property developers and investors to save on Stamp Duty Land Tax (‘SDLT’) when purchasing multiple residential properties in a single transaction. The relief is particularly lucrative for those purchasing blocks of flats, as MDR applies SDLT rates based on the average price of each dwelling, rather than paying the standard rate on each individual property.
Reform
In the recent Spring 2024 Budget, the Government announced the abolition of MDR as of 1 June 2024, as it was no longer achieving its original objective. The decision has been met with mixed reactions from the property industry, some arguing that it is a necessary reform to prevent abuse of the relief, while others believe it will have a negative impact on the housing market, particularly in areas with a shortage of affordable housing.
Are you eligible to claim MDR?
The Transitional rules outline circumstances where the relief may still apply up until 1 June 2024.
- Exchange has taken place on or before 6 April 2024 and there will be no variation to the contract after 6 April 2024
- Contract entered into and substantially performed (i.e. completed) before 1 June 2024
It is important to note, that a transaction which occurs prior to 1 June 2024, will not be treated as ‘linked’ to a transaction which occurs after that date and so MDR would not be available.
Subject to the above, the relief can be applied against the purchase of multiple ‘dwellings’ which is defined as a house, flat or more broadly, a place of residence. In order to qualify, the dwelling must be self-contained, with its own entrance, kitchen, sleeping area and bathroom. For example, MDR may be applicable on the purchase of a property with a separate annex or self-contained unit in the garden. The relief however is not available where the transaction involves the acquisition of a property that is part of one larger ‘dwelling’.
Considering the recent announcement, it is important to agree timescales with sellers from the outset and aim for completion by 31 May 2024 before the abolition of the relief. It is therefore essential to obtain tax advice at the earliest opportunity, to ascertain whether the relief is available.
The availability of Multiple Dwellings Relief and particularly during the transitional period, will depend on specific circumstances and so please contact Jacqui McCoy or John Goodchild of our Real Estate and Private Wealth teams, for further advice.
This article is for general purpose and guidance only and does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered. No part of this article may be used, reproduced, stored or transmitted in any form, or by any means without the prior permission of Brecher LLP.
