Multiple Dwellings Relief to reduce SDLT – Am I eligible and how do I claim it?

In a major relief move to first-time home buyers, the HMRC has stated that they might be able to claim the Multiple Dwelling Relief if they have more than one property. In this article, we discuss what the relief from Stamp Duty Land Tax (SDLT) is all about and the eligibility criteria for it. Let’s get started.

A dwelling can be any place of residence such as a house, flat, cottage, etc.

What is the Multiple Dwelling Relief for SDLT all about?

As the name suggests, the Multiple Dwelling Relief for SDLT is given to homeowners who purchase more than one ‘dwelling’ in a single transaction. In this scenario, the SDLT rates are applied to the average value of all the properties purchased in that transaction, and not the total amount it costs the buyer.

However, in ‘linked transaction’ cases, the purchase of a single dwelling will be eligible for the Multiple Dwelling Relief as well.

What is the meaning of a ‘linked transaction’ in SDLT?

A ‘linked transaction’ occurs when a buyer purchases multiple properties from the same seller. The Stamp Duty Land Tax fee for linked transactions is applied collectively on all the properties that qualify for the linked transaction. As a result, the collective tax applied will be quite higher in comparison to the purchase of individual properties.

Do note, in this case, it falls under Multiple Dwelling Relief. So, an average price of all the properties is calculated and then taxed accordingly.

Some things worth noting are:

Multiple Dwelling Relief is not applicable if the property lease is over 21 years old. Hence, the normal tax rates will be applied. If you reduce the number of properties you own within three years of the linked transaction.

Homeowners that own dwellings prior to purchases that fall under the linked transaction category must pay an additional 3% surcharge on the SDLT. This rule does not apply to mixed-use properties.

Is an annexe eligible for Multiple Dwelling Relief?

Whether an annexe is eligible for the Multiple Dwelling Relief or not depends on what it is being used for. It is dependent on whether the annexe is considered a separate property. An annexe or outbuilding that is self-contained may be regarded as an independent dwelling; however, this is not always the case.

According to several court rulings, it always depends on the circumstances. Let us take a look at the David Merchant and Sarah Gater vs HMRC case.

Here, the annexe did have its physical elements that could give it the classification of being a separate property. However, the annexe did not possess its own electricity or gas metres. What’s more, it did not even possess its own postal address or council tax billing.

If you need to contact your Stamp Duty Land Tax, you need to speak to your agent once you apply for the Multiple Dwelling Relief. They will submit your assessment to the HMRC on your behalf and then wait for a response from them.

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