The removal of the multiple dwellings SDLT relief ‘does far more good than harm’

The chancellor’s decision to abolish multiple dwellings relief for stamp duty land tax was among a raft of property tax reforms announced in the Budget statement yesterday.

Jeremy Hunt said stamp duty relief for people who purchase more than one dwelling in a single transaction was intended to support investment in the private rental sector.

But an external evaluation found “no strong evidence that it had done so and that it was being regularly abused” and as a result, the chancellor announced that he was going to abolish the relief.

Matthew Todd, head of business development at Saffron Building Society, said: “That’s one way to get rid of the abusive claims in the space but that news will not be well received by property investors.”

Also reflecting on the Budget announcement regarding multiple dwellings relief, Matt Spencer, tax partner at Kingsley Napley LLP, likened the measure to a sledgehammer to crack a walnut.

He said: “It’s clearly true multiple dwellings relief has been abused, but abolishing it feels like a sledgehammer to crack a nut. While this will end the abuse of spurious “granny flat” claims, it will also prevent some legitimate investors from investing.

“It will now be much harder to find an investor willing to buy those four flats above a parade of shops. The negative impact of this change, however, is greatly mitigated by the ability to claim commercial SDLT rates on purchases of 6 or more dwellings, and so bearing that in mind, the measures, on balance, seem a good thing.”

But while Spencer believes this abolition is heavy handed, on balance, he feels “it does far more good than harm”.

He points to the fact that there are businesses whose sole activity is to make amends to SDLT returns to claim multiple dwellings relief.

These changes will end the debate over what is a separate “granny flat” or annex (though may lead to a flurry of completions prior to the 1 June implementation), according to Spencer. It is also worth noting anything that has already exchanged is protected.

He added: “The ability for those buying the kind of luxury house that legitimately includes more than one “dwelling” to reduce their SDLT is not something many people will disagree with. By abolishing the rule, however, it will impact a relatively small number of legitimate transactions. The investor buying multiple flats, for example, will now be at a disadvantage unless they can buy at least six [and claim commercial SDLT rates]. The rules therefore will now disadvantage certain investors.

“The change in rules also, in a roundabout way, closes down the “loophole” that allowed those purchasing commercial property alongside multiple dwellings in a single transaction to pay sometimes very low SDLT rates [sometimes close to 1%].”



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