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  • Tax

    SDLT Relief for Multiple Dwellings

    Hi All,

    I am currently considering the purchase of a small block of flats and have heard that SDLT relief may be available?  I have looked at the website below but just wondered if there was anyone who has experience of this and could confirm my understanding of the current situation please?

    https://www.gov.uk/guidance/stamp-duty-l...ansactions

    This site states:

    You can claim relief when you buy multiple dwellings where a transaction or a number of linked transactions include freehold or leasehold interests in more than one dwelling.

    If you claim relief, to work out the rate of tax HMRC charge:

    • divide the total amount paid for the properties by the number of dwellings
    • work out the tax due on this figure
    • multiply this amount of tax by the number of dwellings

    The minimum rate of tax under the relief is 1% of the amount paid for the dwellings.

    Example

    You buy 5 houses for £1 million.

    £1 million divided by 5 is £200,000.

    The amount of SDLT you pay on £200,000 is £1,500 (0% of £125,000 + 2% of £75,000).

    £1,500 multiplied by 5 is £7,500.

    But that’s less than 1% of £1 million, which is £10,000. The amount of tax you pay is £10,000.

    Higher rates of SDLT may be charged from 1 April 2016 on purchases of additional residential properties.

    So...... as an example if I was able to buy a block of 6 flats with the FH for £600k, would I be correct in assuming that due to the additional second home rate the actual rate paid would be 3% for each flat at £100k = £3k x 6 flats =  total of £18k?

    I had been previously calculated that at a total purchase price of £600k:

    First £125k at 3% = £3.75k

    £125k - £250k at 5%  = £6.25k

    £250k - £600k at 8% = £28k

    Hence total = £38k

    Assuming the relief is available this would clearly make a significant difference so any input most welcome - thanks.

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    AIUI, your calculations are correct and you will indeed pay £18k SDLT for a block of 6 flats that costs £600k in total

    Your conveyancing solicitor is the one to sort it for you


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    I think you need to pay attention.

    You buy an "unbroken" Freehold of 6 flats or you buy 6 long lease (already created) plus the Freehold at the £ 600K ?

    The first case I do not see relief, but I am not a tax advisor, speak with Solicitor and tax advisor.

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    Thanks for your input, sorry I should have mentioned yes it is an unbroken block where no leases have yet been created and I'm guessing that it would therefore be considered as one property and hence the SDLT would in all probability be £38k Grrrr....

    Damn the Tories, I've voted for them all my life and now feel I've been stabbed in the back and then they've gone and twisted the knife!

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    To give the Tories their due they've just about run out of their preferred options to balance the books, any more health, aged, disability and social care cuts and they may as well just send out hit squads.  Looking for new victims now. 

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    Given the option I'd go with the hit squads!  There are for sure plenty of LL's out there with maybe one or two properties who declare nothing (and probably plenty with large portfolios too) - I just wish they'd crack down harder on those and all the benefits cheats first.  In a town near us its generally acknowledged that a VERY large proportion of 'single' mums with kids are all claiming full benefits when their partners (who are often the fathers of the children) are in fact living with them and in full time employment.  I guess we LL's are just easier targets....

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    If you have evidence that someone's fraudulently receiving benefits, you have the option of reporting them.  Most people who receive benefits aren't cheats.

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    Tried that one on several occasions, they just get hauled in to see the Council, protest that the partner doesn't live with them, its never investigated properly due to lack of staff and then its all back to as it was before and so it carries on...  Having seen a few TV programmes recently and the extent to which the Councils have to prove that fraud is being committed its a wonder anyone ever gets convicted.

    You claim 'Most people who receive benefits aren't cheats' and I would probably agree with that, but unfortunately there are still a large number who are cheats who are claiming billions in benefits that they are not entitled to - I just believe the Government should be targeting them (and those LL's who are under the radar) rather than LL's who declare everything and have legitimate businesses.

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    The HMRC manual suggests (in my interpretation) that such a purchase does qualify for the multiple dwelling relief

    https://www.gov.uk/hmrc-internal-manuals...sdltm29930

    Extract

    "For the purpose of determining whether a transaction is a relevant transaction, a superior interest (freehold or headlease) over property which includes dwellings is treated as if it were an interest in those dwellings.

    Example: a purchaser acquires the freehold of a new block of four flats which are untenanted. The transaction is a relevant transaction."

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    Will you update us with the outcome of this please in due course

    I am sticking to my guns and saying it does qualify for the relief

    But it wouldn't be the world's biggest shock if I am wrong

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