Stamp duty land tax – Abolition of Multiple Dwelling Relief

The Chancellor has announced in his Spring budget that the Government will introduce legislation in the Spring Finance Bill 2024 to abolish multiple dwellings relief (MDR) which is a bulk purchase relief from stamp duty land tax (SDLT) available in England and Northern Ireland.

MDR reduces the SDLT cost of buying two or more dwellings in the same or a linked transaction.  It works by adding up the total cost of the dwellings and calculating the rate of SDLT based on the average price of the dwellings. The resulting figure is then multiplied by the number of dwellings to arrive at the total SDLT charge.

MDR will not be available for any future purchases that complete on or after 1st June 2024.

Purchasers who exchanged contracts on or before 6th March 2024 remain eligible for MDR regardless of when the transaction completes – provided that there is no variation of the exchanged contract after 6^th March.

MDR was introduced in 2011 to reduce a potential barrier to investment in residential property and to promote the private rented sector (PRS).

The Government has stated that an external evaluation of MDR in 2021 found no strong evidence that the relief made a material contribution to supporting residential property investment and had not produced the desired positive impact on overall housing or PRS supply.

Instead it proved to be more beneficial to HNW buyers who had the potential to save tax by claiming that their acquisition consisted of two or more dwellings.  In some cases this was justifiable – for example the purchase of a country house with a lodge at the end of the driveway.  But in others the relief was claimed in increasingly far fetched scenarios – for example claiming that a pool house containing a bed and a microwave constituted a separate dwelling.

The absence of a definitive set of criteria as to what exactly constituted a separate dwelling created the ambiguity that purchasers sought to take advantage of.  However various cases brought by HMRC gradually established what was unacceptable criteria.

MDR spawned an industry of SDLT ambulance chasers who alerted buyers to the potential that MDR should have been claimed on their recently completed purchase (sometimes in quite ridiculous scenarios). They would offer to amend and re-submit the Land Transaction Return originally submitted to HMRC on completion of the purchase in return for a percentage of the overpaid SDLT.   That industry has now received its death sentence.

Maybe it was a case of a few spoiling it for the many i.e. for those buy-to-let investors who legitimately took advantage of the relief to expand their portfolio to provide much needed supply into the rental market.  Therefore the abolition constitutes another deterrent to investment in the buy-to-let sector.

The abolition of MDR only applies in England and Northern Ireland.  It remains to be seen whether the Welsh and Scottish Governments follow suit in relation to similar reliefs that apply in respect of Welsh Land Transaction Tax and Scottish Land and Buildings Transaction Tax.

Also announced in the Spring Budget is an amendment to the rules to remove an anomaly to claiming First-time Buyers’ Relief for new build flats.  The changes will enable individuals who purchased new leases via nominee or bare trust arrangements to claim First-time Buyers’ Relief. This will ensure that individuals who have used such arrangements in the past are able to claim the relief on future purchases made in their own name.  This brings such individuals in line with purchasers of freeholds and pre-existing leases.

If you have any questions questions regarding Multiple Dwelling Relief, please contact Rosie McCormick Paice or any other member of the Property team. 

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