Stamp Duty Changes For Multiple Dwelling Transactions
From the 1 June 2024 the Multiple Dwelling Relief (MDR) was abolished. It was first introduced in England and Northern Ireland in 2011 and offered Stamp Duty Land Tax relief to purchasers who acquired two or more residential properties in a single transaction or linked transactions.
The reason given for the abolition is that MDR has not achieved the outcomes the government originally intended. When first introduced, it was hoped that relieving the Stamp Duty burden on multiple dwelling transactions would help support investment in residential property and thus increase the number of homes available within the private rented sector. However, a 2023 Tax Reliefs Evaluation Programme, carried out for HMRC, found that despite costing £700 million between 2022 and 2023 alone, the measure had only a “minimal positive impact[i]” on the private rental sector housing supply and was not, therefore, a cost-effective way to meet these aims.
The impact of the abolition
The abolition of MDR only affects purchasers acquiring two or more properties in a single transaction or linked transactions. Under the scheme, they would have been able to calculate the Stamp Duty Land Tax based on the average value of the properties being purchased instead of their total aggregate value. Potentially, this could have significantly reduced the amount of Stamp Duty Land Tax owed following a multiple dwelling purchase. For transactions which came into effect on or after 1 June 2024, the relief will no longer be available. This means that going forward, each dwelling will now be assessed individually, with Stamp Duty based on its full value.
Exemptions and considerations
If you are in the process of a multiple dwelling purchase, MDR will continue to apply provided that contracts were exchanged on or before 6 March 2024, even if completion took place on or after 1 June 2024. However, this will only be the case if there is no change to the contract after 6 March 2024.
In these instances, purchasers should ensure that the date of exchange is included on their return, as well as the completion date, to prevent the MDR from being denied. In addition to these exceptions, the Government has also stated that MDR will remain applicable to contracts which substantially performed before 1 June 2024.
Another consideration that purchasers need to be aware of regards linked transactions that involve properties purchased both before and after 1 June 2024. In these cases, it is no longer possible to link pre- and post-abolishment transactions for the purposes of MDR. This means that any transactions taking place after the abolition will no longer be eligible for relief. Additionally, if this resulted in only a single dwelling being purchased before the abolition date, it will no longer be part of a multiple dwelling transaction and so will be subject to the full Stamp Duty rate.
Transactions involving six or more dwellings
While MDR is no longer available, business transactions for the purchase of six or more dwellings, including mixed residential and non-residential properties, will continue to be eligible for non-residential rates of Stamp Duty Land Tax. Though this can reduce the Stamp Duty burden, it will not provide the same levels of relief as MDR.
Expert legal advice for property transactions
If you are currently involved in a multiple dwelling transaction and have concerns about the impact of MDR abolition on your purchase or sale, the Wilkinson Woodward Property Team is here to help. Our experienced solicitors can explain how the changes may affect your transaction and give expert advice and guidance for the next steps. With a proven track record in both residential and commercial fields, we provide professional legal assistance and support in all property matters.