SDLTM29904 - Abolition of multiple dwellings relief for SDLT – Examples – Linked Transaction Transitional Rules
Example 1:
Transaction 1 - On 14 March 2024 an individual completes on the purchase of 2 dwellings from the same vendor (pre-abolition transaction).
Transaction 2 - On 14 June 2024 the same individual completes on the purchase of 2 more dwellings from the same vendor as part of the same deal as transaction 1 (linked transaction) (post-abolition transaction).
Tax on Transaction 1
Claim to MDR made and tax calculated accordingly.
Tax on Transaction 2
No claim for MDR is allowed.
Transaction 2 is treated as not linked to Transaction 1.
Tax on Transaction 2 is calculated according to the rules in Section 55 FA03 (i.e. at the residential rates at Table A), with consideration of any surcharges (e.g. higher rates for additional dwellings). As it is no longer treated as a linked transaction the purchaser will benefit from a full nil rate band on Transaction 2.
Example 2:
Transaction 1 - On 14 March 2024 an individual completes on the purchase of one dwelling (pre-abolition transaction).
Transaction 2 - On 14 June 2024 the same individual completes on the purchase of 2 more dwellings from the same vendor as part of the same deal as transaction 1 (linked transaction) (post-abolition transaction).
Tax on Transaction 1
No claim to MDR is available (only one dwelling) and tax calculated accordingly.
Tax on Transaction 2
No claim for MDR is allowed.
Transaction 2 remains linked to Transaction 1.
Tax is calculated for Transactions 1 and 2 according to the linked transaction rules in Section 55(1C) FA03 (with consideration of any surcharges (e.g. higher rates for additional dwellings)), i.e. the tax is recalculated for both Transaction 1 and 2 using the rates found at Table A. As it is treated as a linked transaction, the purchaser will not benefit from a second nil rate band. Only one nil rate band applies across both linked transactions.
Where the later linked transaction leads to additional tax being due in respect of an earlier linked transaction, there will be a duty to deliver a further return under section 81A FA03.
Example 3:
Transaction 1 - On 14 March 2024 an individual completes on the purchase of one dwelling (pre-abolition transaction).
Transaction 2 - On 24 March 2024 the same individual completes on the purchase of a mixed residential and non-residential property; a shop with 2 flats above from the same vendor as part of the same deal as transaction 1 (linked transaction) (pre-abolition transaction).
Transaction 3 - On 14 June 2024 the same individual completes on the purchase of another shop with 2 flats above from the same vendor as part of the same deal as transactions 1 and 2 (linked transaction) (post-abolition transaction).
Tax Calculation -Option 1 - Claim to MDR made:
Transaction 1
· No claim to MDR is available (only one dwelling) and tax calculated accordingly.
Transaction 2
· Transaction 2 linked to Transaction 1.
· Although this is a mixed-property transaction, a claim to MDR is made and tax calculated accordingly for both Transactions 1 and 2.
· When this second transaction occurs, the tax due is re-calculated in connection with the first transaction, as they are both relevant transactions for the purposes of Schedule 6B.
Transaction 3
· No claim for MDR is allowed as the relief has been abolished.
· Transaction 3 is treated as not being linked to Transactions 1 and 2.
· Tax is calculated according to the rules in Section 55 FA03 (i.e. at the non-residential rates at Table B).
· As it is no longer treated as a linked transaction the purchaser will benefit from a full nil rate band on Transaction 3.
Option 2 - no claim to MDR is made:
Transaction 1
· No claim to MDR available (only one dwelling) and tax calculated accordingly (i.e. at the residential rates of SDLT).
Transaction 2
· Transaction 2 is linked to Transaction 1.
· This is a mixed-property transaction but the purchaser decides not to make a claim to MDR and must apply the non-residential rates of SDLT to both transactions 1 and 2 (with only one nil rate band applying across both transactions).
· The tax is calculated on the basis of the non-residential rates and the MDR transitional rules do not apply.
Transaction 3
· Transaction 3 is linked to Transactions 1 and 2.
· The purchaser cannot make a claim to MDR
· Tax is calculated applying the non-residential rates of SDLT across all 3 transactions, adjusting the tax as necessary to account for these being linked transactions (with only one nil rate band available across the 3 transactions).
Example 4:
On 14 March 2024 a company agrees as part of the same deal to buy 30 residential properties (dwellings) from the same vendor.
Transaction 1 - Completion on 15 of these dwellings occurs before 1 June 2024 (pre-abolition transaction).
Transaction 2 - Completion on the remaining 15 dwellings takes place after 1 June 2024 (post-abolition transaction).
Option 1 :
Transaction 1
· Claim to MDR made and tax calculated according to the consideration attributable to the first 15 dwellings.
Transaction 2
· No claim to MDR allowed.
· Transaction 2 is treated as not being linked to Transaction 1.
· The ‘6 or more’ rule in Section 116(7) applies to Transaction 2, so the additional 15 dwellings are charged at the non-residential rate of SDLT. As Transaction 2 is no longer treated as linked to Transaction 1 the purchaser will benefit from a full nil rate band on Transaction 2.
If the purchaser changed their mind and decided instead to opt for a different tax treatment in respect of the return already made (withdraw their claim to MDR on Transaction 1 and instead apply ‘6 or more’ to both transactions), they may amend their return for Transaction 1, provided they are still in time to do so.
Option 2 :
Apply the ‘6 or more’ rule in Section 116(7) FA03 in respect of both transactions, adjusting the tax as necessary to account for these being linked transactions (so only one nil rate band available across the 30 dwellings).