Exploring Multiple Dwellings Relief (MDR)

Are you planning to invest in multiple residential properties or a combination of residential and commercial units? Multiple Dwellings Relief (MDR) is a tax relief designed to make such purchases more affordable by significantly reducing the Stamp Duty Land Tax (SDLT) payable on the acquisition of multiple dwellings. This guide covers MDR's eligibility criteria, qualified property types, claiming process, and how to maximize savings through professional advice.

Summary

• MDR reduces SDLT by calculating tax based on the average value of multiple properties instead of the total purchase price.
• It incentivizes investment in residential properties, including student accommodations and mixed-use properties.
• Professional guidance ensures compliance with MDR regulations, helping buyers maximize tax savings and avoid disputes.

Understanding Multiple Dwellings Relief (MDR)

MDR applies to purchases involving two or more dwellings, reducing SDLT by basing the calculation on the average dwelling price rather than the total purchase cost. This makes MDR particularly attractive to property investors and developers purchasing multiple properties in a single or linked transaction.

Eligibility for MDR

To qualify for MDR, buyers must purchase at least two dwellings or a single dwelling through linked transactions. Transactions involving six or more dwellings may qualify for non-residential SDLT rates, which could be even more advantageous for commercial purchases.

Types of Properties That Qualify

Residential Properties

Houses, flats, and self-contained annexes qualify for MDR if they meet specific criteria. Annexes must include a bathroom, kitchen, and separate entrance while providing privacy from the primary residence.

Student Accommodation

Student accommodations, excluding halls of residence, qualify if they include three or more self-contained units. Examples include purpose-built student flats and houses in multiple occupation (HMOs).

Mixed-Use Properties

Properties with both residential and non-residential elements, such as flats above shops, qualify for MDR on the residential portion, reducing SDLT liability for mixed-use property purchases.

Calculating SDLT with MDR

The SDLT calculation under MDR involves dividing the total purchase cost by the number of dwellings and applying the appropriate tax rate to the average price. This calculation method can lead to substantial savings compared to the standard SDLT rates.

Example Calculation

If an investor purchases four flats for £1,000,000:

• Without MDR, the SDLT is £43,750.
• With MDR, dividing the total price by four results in an average price of £250,000 per flat. SDLT is calculated as £2,500 per flat, totaling £10,000, saving £33,750.

Claiming MDR

Individuals and businesses can claim MDR through a conveyancer or tax advisor at the time of purchase or within 12 months retrospectively. Accurate transaction details, such as the number of dwellings and their respective prices, are essential to a successful claim.

Linked Transactions

Linked transactions involve purchasing multiple properties from the same seller or through connected transactions. MDR applies by aggregating these transactions, reducing the SDLT payable through average price calculations.

Seek Professional Advice

Navigating MDR regulations can be complex. Professional advice ensures accuracy, compliance, and maximized tax savings. Consult property tax experts or conveyancers for tailored guidance.