Reform of SDLT rules for bulk purchases of residential property - some relief!

As part of the 2011 Budget, announced on 23 March 2011, the government has set out a new relief for purchasers of residential property who acquire interests in more than one dwelling.

What exactly is the relief?

Currently, the amount of Stamp Duty Land Tax (SDLT) payable on multiple purchases from the same seller is determined according to the total consideration given for the land purchased, i.e. the aggregate value of all the dwellings a purchaser has bought. This means that multiple purchases can create a higher SDLT rate than buying the properties separately.

However, the new relief will allow these purchasers the choice to pay SDLT determined according to the mean consideration, subject to a minimum rate of 1%, i.e. the aggregate value of all the dwellings divided by the number of dwellings.

Also, the dwellings will be treated as residential property no matter how many dwellings are being purchased. Currently the purchase of six dwellings or more is not treated as residential.

Note that if circumstances change within three years of the purchase they must be reported to HMRC if more SDLT would have been payable had the change in circumstances been known at the time of the purchase.

Who can claim this relief?

Purchasers of residential property who acquire more than one dwelling from the same Seller (the same seller will include connected persons, i.e. group companies).

The impact

This relief will reduce the rate of SDLT payable on purchases of multiple dwellings so that it is closer to that charged when purchasing those properties separately. The relief is aimed at encouraging investment in residential property and thereby also pushing the buy to let market.

When will this relief come into action?

This relief will be applicable for transactions entered into on or after the date that the Finance Bill 2011 receives Royal Assent (i.e. comes into force). This is likely to come into force in June 2011 at the earliest.

A hope for the future

In the HM Treasury and HM Revenue and Customs' overview of the tax legislation and rates, which was published alongside the Budget 2011, it is stated that:

"The property industry views the current tax treatment as a barrier for investors in residential property. Removing this barrier is intended to make way for further investment in the sector and, in the longer term, increased supply of private rented property."

This positive change is expected to affect around 7,000 individuals in 2011-2012. For more information please contact us.

See a full overview on tax changes announced on 23 March 2011.