Autumn 2021 Tax Day: Consultation On Amended SDLT Rules For Mixed-Use Property & Multiple Dwellings Relief

On 30 November 2021, as part of the Autumn 2021 Tax Day, HMRC published a consultation on reforms to the rules for calculating SDLT on acquisitions of mixed-use property and multiple dwellings relief (MDR).

HMRC has proposed amending the way in which SDLT is calculated on mixed-use property so that an apportionment method applies with the residential SDLT rates applying to the residential portion of the acquired property and the non-residential SDLT rates applying to the non-residential portion. Alternatively, it has proposed that the non-residential SDLT rates apply only if the non-residential portion of the acquired property exceeds a certain threshold (for example, more than half of the chargeable consideration is apportioned to it).

HMRC has also proposed several options to improve the application of MDR. These are allowing MDR only if all the dwellings are purchased with the intention of using them for a qualifying business use, allowing MDR only for those dwellings that are purchased with this intention, ignoring subsidiary dwellings, or only allowing MDR for purchases of three or more dwellings.

HMRC has asked for views on the advantages and disadvantages, and impact, of each of its proposals. The closing date for comments is 11:45 pm on 22 February 2022.

In recent years, some buyers have sought to (re)classify their transactions as mixed-use or to claim MDR to take advantage of lower SDLT rates. This has resulted in litigation in which HMRC has been successful. It therefore comes as no surprise that the government is seeking to amend the SDLT rules to reduce the opportunities for classifying property as mixed-use, or claiming MDR, in circumstances that it considers inappropriate.

It is important that anyone seeking to take advantage of these tax reliefs should take professional advice from experienced tax advisors.