In the Spring Budget this year the Government announced that with effect from 1 June 2024, multiple dwellings relief (MDR) was to be abolished subject to transitional provisions.
MDR is a very valuable relief and has helped many to significantly reduce their Stamp Duty Land Tax (SDLT) liabilities on residential property purchases. Like many tax reliefs, it has however been abused by repayment agents. HM Revenue & Customs have defeated a steady flow of opportunistic MDR claims in the courts and the Government appears to have grown tired of this and come to the conclusion that the relief no longer achieves its original aim, which was to promote the private rental sector.
The proposed abolition of MDR is contained in the Finance (No. 2) Bill, which is only part way through the legislative process. Following the announcement of the general election yesterday, Parliament will dissolve on May 30th and whilst the Government appears to be making efforts to enact the Bill before this date, whether this is achievable remains to be seen. Whilst Labour agreed with the abolition of MDR, if they become the next government before the Bill has become law, it is unclear whether MDR will be abolished and if so, from what date.
There has been considerable lobbying of the Government to consider a more nuanced approach to the relief as opposed to simply abolishing it and these appeals have largely been ignored. For now, many in the real estate industry will be hoping that if there is a change of government, there may also be a change of policy on this issue and MDR may be saved.
If MDR is abolished, the currently proposed transitional rules provide that it will remain available after 1 June if either:
- the transaction is effected in pursuance of a contract entered into and substantially performed before 1 June 2024; or
- the transaction is effected in pursuance of a contract entered into on or before 6 March 2024, provided the contract is not thereafter varied, assigned or effected in consequence of the exercise of any option, pre-emption or similar right.
Whatever happens to MDR, it is still possible to mitigate SDLT on the purchase of residential property if the property can properly be classified as mixed, i.e. part commercial/part residential or if six or more dwellings are being acquired.
With all the current uncertainty, we would urge those that can still benefit from MDR post 1 June 2024 under the current proposals, to be very careful to preserve it.
