Stamp Duty Relief for Multiple Dwellings?
Discussion
I'm currently negotiating to buy a portfolio of 24 tenanted properties (3 of which are flats in the same building). All are being sold by the same individual (not a Ltd company) and the asking price is just over £2m.
My usual conveyancing solicitor is unfamiliar with Stamp Duty reliefs (i.e. multiple dwelling relief) once the purchase exceeds 6 properties and feels unable to advise. I've therefore set up a meeting with a tax specialist, but prior to attending does anybody have experience of a similar situation?
If so, what did you find was the most efficient method (in regards to SDLT) for purchasing such a portfolio?
My usual conveyancing solicitor is unfamiliar with Stamp Duty reliefs (i.e. multiple dwelling relief) once the purchase exceeds 6 properties and feels unable to advise. I've therefore set up a meeting with a tax specialist, but prior to attending does anybody have experience of a similar situation?
If so, what did you find was the most efficient method (in regards to SDLT) for purchasing such a portfolio?
oks fairly simple
from here
https://www.gov.uk/guidance/stamp-duty-land-tax-re...
Multiple dwellings
You can claim relief when you buy multiple dwellings where a transaction or a number of linked transactions include freehold or leasehold interests in more than 1 dwelling.
If you claim relief, to work out the rate of tax HMRC charge:
•divide the total amount paid for the properties by the number of dwellings
•work out the tax due on this figure
•multiply this amount of tax by the number of dwellings
The minimum rate of tax under the relief is 1% of the amount paid for the dwellings.
Example
You buy 5 houses for £1 million.
£1 million divided by 5 is £200,000.
The amount of SDLT you pay on £200,000 is £1,500 (0% of £125,000 + 2% of £75,000).
£1,500 multiplied by 5 is £7,500.
But that’s less than 1% of £1 million, which is £10,000. The amount of tax you pay is £10,000.
When multiple dwellings relief doesn’t apply
The relief doesn’t apply to the transfer of a freehold reversion or headlease where a dwelling has a long lease of 21 years or more.
The rate of tax HMRC charge for such a freehold reversion or headlease, or for any non-residential property included in the transaction, is the usual rate without any relief.
You may need to fill in a further return and recalculate the tax due if the number of dwellings is reduced within 3 years of the transaction. For example, if you combine 2 flats into 1.
You can claim this relief if the effective date of the transaction is after 18 July 2011. To claim, enter relief code ‘33’ in your return.
from here
https://www.gov.uk/guidance/stamp-duty-land-tax-re...
Multiple dwellings
You can claim relief when you buy multiple dwellings where a transaction or a number of linked transactions include freehold or leasehold interests in more than 1 dwelling.
If you claim relief, to work out the rate of tax HMRC charge:
•divide the total amount paid for the properties by the number of dwellings
•work out the tax due on this figure
•multiply this amount of tax by the number of dwellings
The minimum rate of tax under the relief is 1% of the amount paid for the dwellings.
Example
You buy 5 houses for £1 million.
£1 million divided by 5 is £200,000.
The amount of SDLT you pay on £200,000 is £1,500 (0% of £125,000 + 2% of £75,000).
£1,500 multiplied by 5 is £7,500.
But that’s less than 1% of £1 million, which is £10,000. The amount of tax you pay is £10,000.
When multiple dwellings relief doesn’t apply
The relief doesn’t apply to the transfer of a freehold reversion or headlease where a dwelling has a long lease of 21 years or more.
The rate of tax HMRC charge for such a freehold reversion or headlease, or for any non-residential property included in the transaction, is the usual rate without any relief.
You may need to fill in a further return and recalculate the tax due if the number of dwellings is reduced within 3 years of the transaction. For example, if you combine 2 flats into 1.
You can claim this relief if the effective date of the transaction is after 18 July 2011. To claim, enter relief code ‘33’ in your return.
in very general terms, you just divide the purchase price by the number of units (£2m / 24 = £83,333) and calculate the tax due on that (which would be zero) then multiply by the number of units
but the minimum you can pay under the relief for multiple dwellings rules is 1% of the total purchase price, so you are in for a £20k bill
https://www.gov.uk/guidance/stamp-duty-land-tax-re...
or, more technically
http://www.hmrc.gov.uk/manuals/sdltmanual/sdltm299...
but the minimum you can pay under the relief for multiple dwellings rules is 1% of the total purchase price, so you are in for a £20k bill
https://www.gov.uk/guidance/stamp-duty-land-tax-re...
or, more technically
http://www.hmrc.gov.uk/manuals/sdltmanual/sdltm299...
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