A change to HMRC practice on SDLT multiple dwelling relief
A change to HMRC practice on SDLT multiple dwelling
A recent amendment to HMRC’s guidance indicates lower rates of SDLT may apply on purchases of mixed residential and non-residential property.
Where residential and non-residential property is purchased together (a ‘mixed purchase’), the non-residential rates (up to five percent) of stamp duty land tax (SDLT) ordinarily apply on the VAT inclusive purchase price. Where more than one dwelling is acquired in a mixed purchase, it can be beneficial to make a claim for multiple dwellings relief (MDR). The effect of MDR is to tax the dwellings element at an effective rate calculated as the rate of tax at the residential rates that would apply to the purchase of one dwelling for the average price of all the dwellings. The higher ‘second home’ residential rates were typically applied for the purposes of this calculation (unless the dwellings were purpose-built student accommodation) and this was supported by HMRC guidance. HMRC have amended their guidance to say that the lower ‘homeowner’ rates can be applied if the non-residential element is neither negligible nor artificial.
Taxpayers who have made mixed purchases, claimed multiple dwellings relief and paid SDLT using the higher second home rates may be able to claim a refund. Similarly, if a claim for the relief was not made because using the higher second home rates would have increased the effective rate above the default non-residential rates, a refund may be due.
Such a claim should be possible if made within a year of the due date of the SDLT return filed in respect of the mixed purchase. A taxpayer could consider looking back a further three years, but in our view this may for practical purposes be at HMRC’s discretion.
We recommend taxpayers review mixed purchases made over the past four years (other than ones where the dwellings were purpose-built student accommodation), prioritising those made in the last year (given any claim in respect if these must be made within that year), to see if SDLT has been overpaid.
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