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Chancellor scraps multiple dwellings relief

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The removal of MDR announced in the Spring Budget is a welcome move to simplify stamp duty legislation, but only time will tell if it will have longer-term effects on the property market.

6th Mar 2024
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Jeremy Hunt used his Budget to abolish multiple dwelling relief (MDR) with effect from 1 June 2024.

Part of stamp duty land tax (SDLT) legislation, MDR can add up to significant savings for the buyer when purchasing more than one dwelling at the same time (or under linked transaction rules).

However, an external review found “no strong evidence” that the relief is meeting its original objectives of supporting investment in residential property and the private rented sector, and following a consultation, the Chancellor took the opportunity to scrap it in his Budget speech.

The relief is useful but like all reliefs is often abused, filling tax tribunals with spurious debates about whether a detached garage with a toilet is a dwelling or if a kettle and microwave in a stable counts as a kitchenette.

Following the UK govenment's decision to abolish MDR, the Welsh government has a launched a consultation into doing the same to the land transaction tax (LTT) and to extend LTT to Welsh local authorities when purchasing property for social housing.  

How MDR works

MDR works by allowing the buyer to calculate SDLT based on the average of all the properties purchased rather than their collective value.

For example, if the buyer purchases two dwellings at £250,000 each and assuming a 3% surcharge applies as these are not main residences, the calculation would look like this (£500,000 combined purchase value):

First £250,000 @ 3% (0% + 3%) = £ 7,500
£250,001 to £500,000 @ 8% (5% + 3%) = £20,000
  £27,500
But with MDR, we calculate the SDLT based on each property individually:
Number of Properties  = 2
Average value of each property = £500,000 / 2 = £250,000
SDLT for Property 1 is therefore first £250,000 @ 3%          = £ 7,500
SDLT for Property 2 is therefore first £250,000 @ 3%            =           £ 7,500
  £15,000

Thus a saving of £12,500 is achieved by using MDR. This is a very basic calculation and is meant only as an example. Other factors could apply and so this should not be taken as advice.

Legislation already complex and confusing

In my opinion, the removal of MDR is probably not a bad idea. SDLT legislation is already overly complex and often confusing, and that opens the opportunity up for abuse and also genuine confusion for taxpayers.

MDR itself has been increasingly featured in tribunals, which takes up time and resources, and taxes should be simple or at least clear and logical. With MDR, there are just so many ways to define what a dwelling is that it makes the VAT zero-rating of a sausage roll look easy in comparison.

As MDR only affects those who can afford to buy more than one dwelling at a time, it is unlikely there will be a large crowd of taxpayers lamenting its loss. Only time will tell if it will have longer-term effects on the property market.

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Replies (3)

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By FactChecker
06th Mar 2024 19:11

"it is unlikely there will be a large crowd of taxpayers lamenting its loss" ...
... but I will miss it - or at least its starring role in some of the more amusing posts to Any Answers!

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Replying to FactChecker:
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By Paul Crowley
06th Mar 2024 20:02

Less tax cases in Taxation magazine. So many stupid advisors looking to rewrite the forms that were originally submitted correctly

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