News & Insights

Multiple Dwellings relief from Stamp Duty

The Residential Conveyancing team considers the Multiple Dwellings Relief from Stamp Duty Land Tax.

Stamp Duty Land Tax (‘SDLT’) is an important part of any prospective purchaser’s calculations when planning their next home move. Stamp duty in England is payable when purchasing a residential property for £125,000 or more and the amount you pay is determined by the purchase price of the property and whether you are buying a second home.

The amount of Stamp Duty Land Tax payable often runs into thousands of pounds. There are a number of reliefs from stamp duty, most notably Multiple Dwellings relief (‘MDR’) which has become more widespread in recent months.

HMRC guidance states that MDR may be claimed where a transaction or series of linked transactions include interests in more than one dwelling. MDR can be claimed regardless of whether or not the property/properties being purchased are second properties.

The most obvious scenario where MDR is likely to be claimed is where a developer is purchasing a number of flats in one transaction as part of a development portfolio. However, a purchaser is also entitled to claim MDR where the property comprises of a main home and annexe. The annexe must be self-contained and the value of it also represent no more than one-third of the purchase price. There are certain features of the annexe which demonstrate it being self-contained, for example the annexe containing its own cooking and washing facilities and also having its own entrance independent of the main property. The annexe can form part of the main building of the house or be a separate building entirely.

The savings made in claiming MDR are found in the method in which the SDLT is calculated. If MDR is claimed, the SDLT is calculated on the average value of the properties being purchased, rather than being the individual figures calculated on each property. However, an important caveat to MDR is that should the number of properties be reduced within 3 years of the effective date of completion, the representative value of the MDR saving of that property can be clawed back by HMRC.

If you would like more information on this subject, please do not hesitate to contact the residential conveyancing team.