Marvin Reynolds and Jeff Webber in our Reading and London offices authored “SDLT multiple dwellings reliefs”, published by Tax Journal on 15 October 2021.
Multiple dwellings relief (MDR) reduces the amount of SDLT payable on the acquisition of two or more dwellings in a single transaction or in a series of linked transactions. Relief is given by calculating SDLT on the average price payable for the dwellings, multiplied by the number of dwellings. Relief may be clawed back
if there is an ‘event’ within three years of the acquisition. Similar rules apply in Scotland and Wales for LBTT and LTT purposes (but no clawback within LTT).
HMRC provides guidance on what constitutes a separate dwelling, and it has won all the recent cases on this point in the tax tribunal to date.
The article includes sections on:
- The purpose of MDR
- When might MDR apply?
- How the relief works
- Interaction with other SDLT rules
- What constitutes a dwelling?
- Potential pitfalls
- Where does this leave us?
The relief has proved to be popular and can give rise to significant SDLT savings. That said, it is apparent that relief is being claimed when it may not be available, and there have been a number of recent tribunal decisions that have highlighted the extent to which HMRC is actively enquiring into relief claims and the characteristics that must be present for relief to apply. The HMRC scrutiny has no doubt been driven by the increasing number of speculative refund claims being made after a land transaction return has been submitted.
It is apparent from the HMRC guidance and case law that the residents of each dwelling must be able to live independently of the residents of the rest of the building/ another building, and each dwelling must have its own independent access and domestic facilities, including its own front door, kitchen and bathroom. Privacy is another important factor.
When taking a view on whether there are separate dwellings, one should take into account a number of factors, including how the property is described in marketing materials, whether there are any legal restrictions on the separate use of the land, and whether each dwelling has its own council tax assessment and control of its own utilities. HMRC has been very active in this area, and it is actively challenging transactions where it considers that there are not sufficient grounds to make a claim.
In our practical experience, HMRC will accept a claim for MDR and will pay refunds where sufficient evidence is provided to demonstrate that there are separate dwellings.
For more information, or for assistance, please contact Marvin Reynolds or Jeff Webber.