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Can I claim Multiple Dwellings Relief to reduce SDLT?
You can claim MDR if you acquire more than one “dwelling” in one transaction or set of linked transactions.
The calculation itself, and the rules on what constitutes a “dwelling”, are complex. Our specialist tax team can help you to:
- Decide whether you might have a retrospective claim, and, if you decide to go ahead,
- Make that claim on your behalf.
What follows is a general introduction to MDR, and some other points to consider. If you would like to discuss your transaction, please contact our team using the details at the end of this article.
What is a “dwelling”
The legislation states that a building or part of a building is a dwelling if it’s used as, or is suitable for use as, a single dwelling, or is in the process of being constructed or adapted for such use.
So, how do you know whether your spare room, annex or top floor flat counts as a dwelling, separate to your main house? The courts and HMRC provide guidance on the factors to consider, although you will need to weigh these up as the existence of one particular factor will not be decisive.
How much could I claim?
The relief will broadly reduce your SDLT to the point where it reflects what SDLT would have been due, had the properties been acquired completely separately. As the rate of SDLT increases with the price you pay, for example with no tax due at all on purchases under £250,000, a successful claim can result in significant savings.
If I claim Multiple Dwellings Relief won’t I also be charged the 3% additional property surcharge?
If you purchase a residential property, and as a result you own (or if you already own) more than one residential property, the normal SDLT rates are increased by 3%.
But, just because you’re claiming MDR, it doesn’t automatically mean you are due to pay the surcharge. The tests are different, and the surcharge doesn’t apply in all circumstances. For example, if you don’t own any dwellings already, and purchase a property with a self-contained annex, this may qualify as a separate dwelling for MDR, and relief may be due. However, you may not need to pay the additional property rates if it is classed as “subsidiary” to the main dwelling.
How can I claim Multiple Dwellings Relief after my purchase?
You still have time: you can claim through an amendment to your SDLT return within 12 months of the date your original return. Plus if it’s been more than a year, you may still be able to make a claim to overpayment relief within 4 years. Claiming the relief can result in a substantial refund of SDLT.
But be aware that HMRC have the power to open enquiries into your amended return or your claim to overpayment relief, and if they find that you have incorrectly claimed MDR, they will seek to recoup that relief, interest will be chargeable, and you may be subject to penalties.
How our tax solicitors can help you with your claim?
You should therefore think carefully about your purchase, and seek professional advice if you think you may have a claim. Our specialist tax solicitors can help to navigate the complexity, advise you on your chances of a successful claim, and help you to avoid the potential pitfalls.
We can also consider your transaction in a broader context, and advise you on any VAT, Capital Gains Tax, Capital Allowances and Inheritance Tax implications.
If you need tax advice relating to Multiple Dwellings Relief or have questions on SDLT and reducing your tax bill, please get in touch with one of our Personal Tax Solicitors today by email or call on 0207 822 1632.