SDLT - Multiple Dwelling Relief

SmashedAvacado

I have seen the thread that is a year or so old, and it seemed from that, that the situation is a little unclear.

Facts - a friend is looking to buy a property. The property is on one legal title. It consists of 7 properties. All of which are separate dwellings.

Friend is wondering whether he can claim multiple dwelling relief at 1% across the board on the basis that the calculation comes out at slightly less. He doesn't currently own a property.

There was some talk on the earlier thread that the 3% surcharge would apply on all of the properties, but that makes no sense to me if the buyer owns no property already - as otherwise its not really a relief. Presumably the surcharge only applies is property is already owned.

As anyone looked into this? Got a view? been through this process? The HMRC manual is not particularly helpful

SDLT_Geek

The rules to look at here are:

(a) The 6+ dwellings rule in Finance Act 2003 s116(7). If the 7 dwellings are bought in one transaction then usually the non-resi rates of SDLT apply.
(b) If multiple dwellings relief is claimed then SDLT is calculated based on the average value of the dwellings using the surcharge (+3% rates) and then multiplied by 7.

It is a matter of working it out on both bases and seeing which is most favourable. If the MDR result is favourable then thought should be given to the clawback; for example does your friend propose converting the property into three dwellings?

SmashedAvacado

Why would the surcharge apply if they don’t already own property?

SDLT_Geek

Because he will own 7 dwellings!!!!

SmashedAvacado

Yes but it’s not about what you own is it? It’s about a transaction that triggers the payment. I can’t see how there would be multiple dwelling relief which makes it clear that 1% is the minimum of then 3%!is added on top. I don’t think that can be right. In what circumstances would the additional 3% not apply?

SDLT_Geek

Buying 7 dwellings the 3% surcharge might not apply if 6 of them were "subsidiary" to the main one. The main one would have to be worth 2/3 or more of the total price. Also all 7 would need to be in the same building, or the other 6 would need to be in the grounds of the main one.

I have yet to see a transaction involving more than four dwellings where the surcharge did not apply.

SmashedAvacado

Hi. Interesting thank you. That’s the scenario here more or less. Where in the manual is the 3/3 rule etc covered

SDLT_Geek

There is something about the 2/3 test for “subsidiary dwellings” here: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09755