The Welsh government is consulting on plans to remove multiple dwellings relief in line with the abolition in England from June.

The proposal is to scrap land transaction tax (LTT) multiple-dwellings relief, review the six-dwellings rules and extend LTT relief to Welsh local authorities when buying property for social housing purposes.

The consultation in Wales, which is open until 19 May 2024, comes as the England rules are due to come into force from 1 June 2024, putting pressure on the Welsh tax authorities to implement the rules quickly if they opt to press ahead with the changes.

Alterations are being proposed due to widespread abuse of the multiple dwellings relief (MDR) tax scheme, with a number of property buyers applying for tax break by claiming to be purchasing more than one property in a single transaction or through linked transactions.

As a result, the Chancellor announced in the Budget in March that the tax break, was first introduced in 2011, was to be scrapped.

MDR tax relief is estimated to cost around £8m a year in Wales alone, so the Welsh Senedd needs to fill this gap as the Welsh block grant is being reduced by the same amount from 1 June.

Wales plans to scrap the LTT Relief for Acquisitions Involving Multiple Dwellings, also known as MDR.

Abolition of MDR will be implemented on transitional rules to support buyers who purchase straddles both systems.

In addition, the six-dwellings rule will be scrapped if Wales goes ahead with MDR removal. This would affect buyers purchasing six or more residential properties in a single transaction. In future, any six-plus acquisition would be classed as a non-residential purpose.

But this could distort the market for buyers of between two and five properties, who would have to pay the higher residential rate, resulting in higher tax bills than those falling under six-dwellings rules.

As things stand, purchasers can treat the transaction as non-residential, and pay LTT at non-residential rates, or treat the purchase as residential and hence claim MDR.

One of the concerns raised in the consultation is whether removal of the six-dwellings rule would adversely impact the private rented sector in Wales.

The consultation also proposes LTTA tax relief for Welsh local authorities when purchasing property for use in social housing as they are currently charged higher rate residential LTT. Any new rules would see local authorities benefit from same tax rules as registered social landlords, but would not provide a total exemption.