We all like a good tax relief, but what if you can have multiple reliefs? Surely that would result in a scream of delight! And yet it seems that, often, Multiple Dwellings Relief is being missed and, as a result, too much SDLT is being paid.
The relief was introduced for transactions effected after 19 July 2011 and applies where there is an acquisition of an interest in at least two "dwellings". Prior to its introduction, an acquirer would have to pay SDLT on the aggregate consideration, because the various purchases would have been "linked". Now, you look at the average price attached to each dwelling and apply the rate to the whole consideration.
As an example, four dwellings are acquired for a total consideration of £1m.
Under the old rules, SDLT would have been paid at 4% on £1m ie £40,000.
Under the current rules, you take the average price per dwelling, which is £250,000 (£1m divided by 4). The SDLT effective rate, under the new regime detailed earlier, would be 0% on £125,000 and 2% on £125,000, so total SDLT of £2,500, which gives an effective rate of 1%. SDLT is then calculated by applying that rate to the whole consideration, so £1m at 1%, equals £10,000.
As a result, in this scenario, a purchaser is paying £30,000 less, merely by claiming a relief allowed for in the legislation.
But the good news doesn't stop there. If you look at the definition of a dwelling, it not only includes a building used or suitable for use as a single dwelling, but also one that "is in the process of being constructed or adapted for such use".
The definition is, therefore, widely drawn and can lead to some quite interesting planning opportunities.
If you're making an acquisition that consists of a number of units, make sure you get advice. It would be a crying shame to miss out on the pleasure of multiple reliefs!
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
