When a taxpayer buys qualifying residential properties, they are given a multiple dwellings relief. It is a land tax relief for property transactions that allows the rates to be applied on the average value of the properties instead of the total purchase price. First-tier tribunal readings provide insights into how HMRC distinguish between single dwelling and two separate dwellings that would qualify for MDR.
What property agents need to know about MDR?
Estate agents play an essential role in identifying tax savings that are beneficial to all parties. When a purchaser benefits from stamp duty liability, then they have extra funds for a high offer. An increased offer translates to a happy seller and more commission. Residential property purchases can be eligible for specific reliefs from SDLT. The objective is to identify the potential reliefs as earliest as possible and present them as evidence for tax advisers. If HMRC decides to challenge the claim, the description is already included in the particulars of the sale.
What makes a building eligible for MDR?
In an MDR, the land transaction tax relief for acquisitions involving multiple dwellings ensures that the stamp duty charged is not the total sale price of a house but the sale price divided by the total properties acquired despite the value or size. Dwelling is not part of the legislation, but it is accepted as part of a building or a building that handles all the basic living needs of a person. When you define a structure or part of it as suitable for a single dwelling, the statutory languages show suitability for standalone or self–sufficiency use as a home.
If the house has necessary facilities, it may be considered for Midriff there is an area that can be used as a bedroom, kitchen, and washing facilities, then it qualifies. If the house is independent of the main house and can be accessed through an entrance separate from the main house, it is likely to qualify. Converted garages, granny annexes, party barns, pool houses, and garden offices can be eligible for MDR relief.
The common issues estate agents experience is where a property has an extra dwelling, but it cannot be accessed independently. For example, an annex can be accessed by walking through the ground floor instead of a side entrance. You can increase the property value by making enhancements that increase the likelihood of relief. When such enhancements are made, they need to be included in sales particulars since they are third-party documentation.
For example, you have a large detached house in half an acre garden, and you put it in the market for $1.5 million. The price includes the house and the self-contained annex. The stamp duty without the reliefs plus the application of SDLT holiday goes for $78,750. On the other hand, the extension qualifies for MDR and is a subsidiary of the main house.SDLT will then be chargeable on the two dwellings, with each being purchased for 750,000. The liability after the relief application, including the holiday rates, is $25,000; therefore, the total savings will be $53,750. With these MDR reliefs, the seller can increase the property value, the buyer only pays for needed stamp duty, and the agent gets an increased commission.
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