HMRC eyes Reform of Stamp Taxes and Multiple Dwellings

Changes to reform multiple dwellings relief and how stamp duty land tax is calculated on purchases of mixed-use properties could be in the pipeline.

A 12-week consultation closed last month, after HMRC sought feedback on proposals to crack down on abuse by restricting homeowners from obtaining the relief. Multiple dwellings relief is available when at least two dwellings are purchased in a single transaction, or as part of a series of linked transactions between the same vendor and purchaser.

The buyer can choose to apply the rate of stamp duty land tax determined by the average value of the dwellings, rather than the combined value of the purchase.  This enables the buyer to benefit from multiple nil-rate and lower percentage bandings, significantly reducing their stamp duty land tax liability.
HMRC could restrict the relief so it can only be claimed if all properties are, or a single property is, bought for a qualifying business use.

Alternatively, the tax authority could introduce a subsidiary dwelling rule to prevent smaller subsidiary dwellings, such as a ‘granny annex’, from qualifying for the relief due to their size or value. The other option was for the relief to only apply to purchases which include three or more dwellings, meaning a lot of properties could fall outside of scope for the relief. 

Mixed-use properties are those which consist of both residential and non-residential uses, such as a flat above a shop or pub. Purchases of these properties are subject to stamp duty land tax at the non-residential rates. These rates offer lower stamp duty land tax bands and are not subject to any surcharge, leading HMRC to believe some purchasers have gained from including token amounts of non-residential property within residential purchases.

To close this loophole, either a new apportionment basis or a new threshold, so that more than 50% of the purchase must include non-residential property to qualify as mixed-use, could kick in.

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