SDLT: The Abolition of Multiple Dwellings Relief

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In the Spring Budget of 6 March 2024, the Chancellor announced the abolition of multiple dwellings relief (MDR) from Stamp Duty Land Tax (SDLT).  Although it was not one of the likely measures trailed in advance of the Budget, it was not a huge surprise given that MDR had been the subject of an HMRC Consultation, and that there was a widespread perception of the relief being abused.

The original aim of MDR was to promote the private rented sector of housing supply by supporting residential property investment.  However, an external evaluation commissioned by HMRC found that over half of all those claiming MDR were private individuals using the properties for personal purposes.

The SDLT equivalent of ‘ambulance chaser’ companies was prevalent – contacting buyers after the completion of their purchases to persuade them to file an amended SDLT return and claim MDR.  Often these transactions would involve a high-value property with a separate building in the grounds – the argument being that such second building was itself a separate dwelling.  A refund would then be paid by HMRC, out of which the company got its fee, only later for HMRC to enquire into the return, challenging the analysis, with the result of a repayment of the refund being due, together with interest and sometimes penalties.

Any contracts exchanged on or before 6 March 2024 can still benefit from MDR regardless of the completion date (subject to anti-avoidance rules, of course).  Everyone else will need to exchange and complete (or ‘substantially perform’) on or before 31 May, since from 1 June 2024 MDR will be abolished.

Who will be affected by this change, apart from the MDR-chasing companies of course?

Melanie Leech, Chief Executive of the British Property Federation, said in reaction to the Budget:

“Abolishing SDLT multiple dwellings relief will hit the build-to-rent sector at a time when the Government should be doing everything in its power to encourage more long-term investment into professionally managed rental homes. This will hinder rather than stimulate the efficiency of the housing market.”

Private investors buying between 2 and 5 dwellings from the same seller will now have to pay full residential SDLT, at the 3% surcharge rates, so smaller-scale investors will be deterred.  Those buying 6 or more dwellings from the same seller won’t be able to get MDR, but they will still benefit from the non-residential rates of SDLT which apply automatically to such purchases – broadly 5% with two smaller lower-rate bands for part of the overall price.

Those acquiring a portfolio of perhaps hundreds of single dwellings will end up paying more, though this may be less of an issue for buyers of buildings comprising co-living or cluster accommodation, because shared kitchen / bathroom / living facilities mean the number of dwellings in such buildings is often lower than where there is a block of self-contained flats, so the difference in tax payable will not be so great.

The message to anyone with MDR in their investment strategy is to do everything they can to get their current deals over the line before the end of May.

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.