Multiple Dwelling ReliefDec 12, 2019
If you are in the process of buying a property which is comprised of at least 2 dwellings, such as a granny annex, you may be able to claim for Multiple Dwellings Relief (MDR) from HMRC. Separate dwellings would have separate entrances and may be considered to be separate even if they are both part of the same building.
What is MDR?
MDR is a way of reducing the amount to be paid in respect of stamp duty and applies to property transactions completed on or after 19th July 2011.
When should it be claimed?
MDR should be claimed when submitting the Stamp Duty Land Tax (SDLT) Return on completion of a purchase transaction. This is a specialist area of tax law and you should obtain specialist tax advice as early as possible. Otherwise, this can result in an overpayment of SDLT.
If MDR was not claimed on completion of a purchase transaction, it is possible to redress the situation. You can apply for a refund in writing to the SDLT Office within 1 year from the filing date / date of completion. A number of documents will need to be sent, including the revised figures and confirmation of the amount of refund due. HMRC advise that applications can take up to 40 working days to be processed.
How do you calculate it?
The MDR calculation itself can be tricky, which is why a specialist should be consulted. The main issue with MDR for conveyancing lawyers is knowing when you have a transaction that involves ‘multiple dwellings’.
HMRC defines a ‘dwelling’ as: “A building or part of a building which is suitable for use as a single dwelling or is in the process of being constructed or adapted for such use.” It therefore becomes a question of whether a given transaction consists of one or more dwellings.
An update from the SDLT Manual on 24th October 2018 provides recent further information and clarification on this and states: “it is a question of fact whether a purchase consists of one or more than one dwelling. A selfcontained part of a building will be a separate dwelling if the residents of that part can live independently of the residents in the rest of the building. This would include having independent access and domestic facilities.”
All in all, it is important for conveyancers to consider if a given transaction includes an annex or a self-contained residential unit before submitting the SDLT Return on completion. This is especially so where claims companies are seeking compensation for the amount of the overpayment from law firms who do not. If MDR is not claimed, it is possible to apply for a refund of the overpayment. An election for MDR must be made within 1 year of completion.