Multiple Dwellings Relief (MDR) – Introduction
This article focuses on the Stamp Duty Land Tax (“SDLT”) relief called Multiple Dwellings Relief.
First, it is important to discuss the definition of ‘dwelling’ which we do in the first part of this article.
We then discuss the effect of Multiple Dwellings Relief where a buyer purchases two or more qualifying dwellings.
What is a Dwelling?
The definition of “dwelling” is important for the purposes of SDLT.
There are principally two areas where whether something is, or is not, a dwelling it can lead to significant reduction in the amount of SDLT payable. These are as follows:
- Whether the 3% surcharge for ‘additional properties’ applies to the purchase; and
- whether Multiple Dwellings Relief applies to a transaction.
For more information on the 3% surcharge please see our dedicated note on the topic.
So… What is a Dwelling?
The statutory definition of ‘dwelling’ is not enormously helpful.
However, it is clear that for SDLT purposes that the relevant property must be:
- in use, or be suitable for use, as a single dwelling; or
- is in the process of being put in to use as a single dwelling at the relevant date.
The Case of Bewley Ltd v HMRC
In this case, it was held that a bungalow that:
- a dwelling not used as a dwelling at purchase,
- had radiators and the piping removed; and
- had asbestos which had prevented renovations
…was not suitable for use as a dwelling.
The result was that it was held that:
- the 3% surcharge did not apply; and
- that that the lower rates for non-residential applied.
This resulted in a significant reduction in the SDLT paid.
While much excitement has been aroused by this case, it is important to understand the limitations of the decision.
What is Multiple Dwellings Relief?
Where Multiple Dwellings Relief applies on the purchase of two or more dwellings then the SDLT is calculated by reference to the average value of the properties purchased.
This SDLT figure is then multiplied by the total number of dwellings.
Where the relief does not apply then SDLT would be chargeable by reference to the total purchase price of all the dwellings.
As such, the application of the relief can reduce in significant changes.
The definition of “dwelling” for this purpose is the same as for the 3% higher rates above. As to the definition of dwelling, see above.
Multiple Dwellings Relief and ‘Granny Annexes’
What about where the property that is being purchased also includes some other self-contained accommodation – for example, a so-called Granny Annex – attached to the property or in the grounds?
If the other accommodation (eg Granny Annex) is a separate dwelling, then Multiple Dwellings Relief can be claimed.
Our view is that, in order to meet the natural definition of ‘dwelling’ there must be a basic standard of self-contained facilities. For example, this might include:
- services and appliances for the provision of personal hygiene;
- Facilities to provide for the preparation and consumption of food and drink;
- the storage of personal belongings; and
- Somewhere to sleep
The requirement for use as a single dwelling would also seem to require a degree of separation from the main accommodation.