The Government has announced that, with effect (mostly) from 1 June 2024, multiple dwellings relief for SDLT will be abolished. 

The announcement followed a consultation that ended in February 2022 (yes, that long ago). The consultation looked at two issues:

1. Mixed property transactions that include both residential and non-residential property; and
2. Multiple dwellings relief. 

Mixed property 

• The consultation mooted the introduction of an apportionment of consideration between residential and non-residential property.  That would have meant that an assessment would have been needed of how the consideration was divided between different elements of purchased property, with residential and non-residential rates applying to the relevant amounts. 
• The government concluded that they would not make any change. They acknowledged that apportionment would likely be an “administrative burden” for purchasers. 
• The government also noted that “HMRC continues to have success in challenging spurious claims to mixed-property treatment.” (See my earlier article on this here.)

Multiple dwellings relief (MDR)

• The consultation suggested options to amend MDR. These were:
  • 1 - restrict MDR to transactions where all dwellings were purchased for a ‘qualifying business use’ such as redevelopment or rental; 
  • 2 - restrict MDR to those dwellings within a transaction purchased for a qualifying business use (but not barring MDR if there were other dwellings being purchased that would not be used for a qualifying business); 
  • 3 - restrict MDR so that ‘subsidiary’ dwellings (a concept found elsewhere in the legislation) would not qualify for MDR; or 
  • 4 - restrict MDR to the purchase of 3 or more dwellings 
• The government concluded and noted that:
  • MDR will be abolished. 
  • MDR is not “cost effective… and is also often subject to abuse”. 
  • 51% of MDR claims came from individuals purchasing properties for personal use.
  • 73% of private individuals said that MDR had little or no influence on their ability to purchase. 
  • 32% of businesses buying property to let in the private rental sector said that the relief had an important influence on their decision to purchase. 
• For those with purchases in the pipeline, the deadline has been set as 1 June 2024. For transactions that have exchanged but not completed, MDR will continue to be available after 1 June 2024 subject to certain conditions. 

Thoughts on the change

Abolishing MDR is an easy win for the government. It tidies up the bloated SDLT legislation (well, removes one schedule of it at least), makes SDLT returns simpler for purchases of multiple dwellings (and presumably the time taken by HMRC to review and investigate returns), and increases tax receipts. 

The government estimates £70m increased intake next tax year, increasing to £385m by 2028/29. This reflects the material difference that MDR can make to the SDLT liability on the purchase of property in England and Northern Ireland. 

Abolishing MDR also reflects the statistics noted above (and our experience) that often MDR was a ‘nice to have’ rather than a deal breaker. Purchasers generally have a good idea of what their SDLT liability might be and claiming MDR often came along as a nice surprise once a deal had already been agreed. 

Not adopting apportionment for mixed property, is perhaps also understandable given some of the consultation responses. This does mean, however, that HMRC will continue to look closely at purchases of dwellings along with land to determine if the mixed rates can apply. 

So, we say goodbye to MDR and best of luck to property solicitors up and down the country, as they push to get those transactions completed by 1 June.