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July 17, 2020

SDLT Relief for Subsidiary Dwellings

This article will cover the Stamp Duty Land Tax “SDLT” relief that may be available to you if you purchase a subsidiary dwelling alongside a principal dwelling.

Normally if you purchase an additional residential property which will not be used as your main residence, an SDLT surcharge may be applicable. The surcharge increases the basic rates of SDLT by 3%, meaning that more SDLT will be payable.

However, a purchase of more than one dwelling may be treated as the purchase of a single dwelling for SDLT purposes if one or more of the dwellings is subsidiary to the principal dwelling. This is applicable if:

  • The subsidiary dwelling is within the same building as, or in the grounds of, another dwelling purchased in the same transaction (the principal dwelling); and
  • The principal dwelling and the garden and grounds attributable to that principal dwelling are at least two thirds of the value of the land purchased in the transaction.

As an example, this may apply to the purchase of a property where the land contains a garage, above which is a separate self-containing living accommodation that would be classified as a ‘dwelling’ for SDLT purposes.

HMRC have confirmed that in this situation:

  • The higher rates of SDLT (with the 3% surcharge) are not applicable; and
  • Multiple Dwellings Relief “MDR” may be claimed.

Practically, this means that a claim for MDR may be made at the normal rates of SDLT.

MDR is available when an individual purchases more than one dwelling at the same time. The rate of SDLT is calculated by dividing the total amount paid for the properties by the number of dwellings, calculating the SDLT due on this figure and multiplying this by the number of dwellings.

As one of the dwellings is a subsidiary dwelling, the value of this will be lower than that of the principal dwelling. Consequently, by claiming MDR, it is likely that the amount of SDLT payable on the purchase will be significantly reduced.

MDR must be claimed when the SDLT return is submitted. However, if the SDLT return has already been submitted, it is possible to amend the SDLT return to claim this retrospectively (within 12 months of the filing date).

If you believe that you may be able to claim MDR on the purchase of a subsidiary dwelling alongside a principal dwelling and are unsure about the process, please contact a member of our team.

Related Articles

Possible Reclaim of 3% SDLT Surcharge Beyond 3 Year Time Limit

Dwell, Dwell, Dwell – HMRC Clarifies SDLT Guidance

Is a House always "Residential Property" for SDLT?


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