Some questions have been coming to me, largely because of unclear guidance being given in budget news reports, relating to the availability of multiple dwelling relief on acquisitions of properties by companies where the property concerned contains more than one self contained dwelling.
For the new 15% rate to apply the consideration attributable to at least one of the dwellings must be more than £2 million.
It does not therefore apply, for instance, where a company buys a property for £3 million which contains 3 flats unless one or more of those flats are worth more than £2 million.
Looking at a couple of examples.
Example 1
Property is to be bought for £3 million.
The property comprises 3 flats.
The ground floor flat is worth £500,000
The first floor flat is worth £450,000 but the top floor flat is a duplex with wonderful views and is worth £2,050,000.
To calculate the SDLT. You ignore the single purchase of the Property.
The top floor flat is treated as one acquisition of a property worth over £2 million. A return must be filed in respect of that acquisition and SDLT will be chargeable at the rate of 15% (£307,500).
The other flats are treated as a separate purchase with the requirement to file a second SDLT return.
This will be treated as the purchase of 2 dwellings for £950,000.
Presuming the usual conditions for Multiple Dwelling Relief (MDR) apply it should apply to the acquisition of these 2 flats so the SDLT chargeable will be £950,000/2 = £475,000 so £950,000 x 3% = £28,500.
Example 2
A property is bought for £3 million containing 3 flats of equal size.
Ground Floor Flat £1,750,000 ( having the benefit of a garden)
First Floor Flat £600,000
Second Floor Flat £650,000.
The 15% rate will not apply at all as none of the properties are worth over £2 million individually so only one SDLT return.
Assuming MDR applies, SDLT calculation would be £3,000,000/3 =£1,000,000 (exactly) average so SDLT will be £3,000,000 x 4% = £120,000.
Before the budget there was no need to obtain formal valuations in respect of the values attributable to each dwelling where multiple dwellings were being acquired in order to be able to claim MDR. Now companies will have to get valuations where it is possible that one or more of the dwellings could be pushing the £2 million limit.
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