The Government has announced the abolition of Multiple Dwellings Relief (MDR) with effect from 1 June 2024. This means that land transactions that complete on or after this date and involve two or more dwellings will no longer benefit from a relief that allows purchasers to apply SDLT rates to the average price per dwelling (rather than the whole purchase price).
There are limited cases where MDR will still be available after 1 June 2024. Namely, this will be where contracts have been exchanged on or before 6 March 2024 (the date of the Spring Budget and the date of the announcement) provided they are not varied before they complete.
The Government commissioned an external evaluation of MDR to assess whether it was meeting its original policy objective (i.e. to enhance investment in residential property and promote private rental sector housing supply). It seems that the evaluation concluded that MDR does not play "a significant role in business decision making and supporting investment in property for the private rental sector (its original intention), and that it has minimal positive impact on the housing supply overall". It seems that part of the reason for its abolition is private individuals acquiring high value properties and arguing that granny annexes, converted barns, outhouses and the like could be treated as separate dwellings with HMRC noting that "individuals are particularly vulnerable to tax repayment agents who encourage the submission of incorrect claims to MDR".
If a purchaser is acquiring 6 or more dwellings in one transaction, it can choose to use the lower non-residential rates, rather than the higher residential rates which have the additional cost and complexities of the additional 3% surcharge (where the purchaser is a company) and the additional 2% surcharge (where the purchaser is non-UK resident). The reality, however, is that even if the non-residential rates are claimed, investors in the private rental, the purpose built student accommodation and senior living sectors are likely to have significantly higher SDLT liabilities as a result of the abolition of MDR.
If you have any queries about how the abolition of MDR may affect your transaction, please contact James Meakin and Rosalind Moore.
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