On 6 March, the Chancellor of the Exchequer Jeremy Hunt delivered his Spring Budget, accompanied by a full fiscal statement from the Office of Budget Responsibility (OBR). A summary of the key announcements relating to SDLT are set out below.
Multiple Dwellings Relief
The Government will introduce legislation in the Spring Finance Bill 2024 to abolish Multiple Dwellings Relief (MDR), which applies where more than one dwelling is acquired, from 1 June 2024. Property transactions with contracts that were exchanged on or before 6 March 2024 will continue to benefit from the relief regardless of when they complete, as will any other purchases that are completed before 1 June 2024. This is subject to various exclusions; for example that there is no variation of the contract after that date.
It should also be noted that SDLT applies only to transactions in property in England and Northern Ireland. MDR in Land & Buildings Transaction Tax and Land Transaction Tax, in respect of property in Scotland and Wales, respectively, currently remains in place and unchanged.
MDR provides for partial relief from SDLT where more than one dwelling is acquired, by calculating the SDLT due by reference to the average chargeable consideration provided for all the dwellings in a transaction (or linked transactions) and then multiplying the tax due by the number of dwellings. The relief provided under MDR is subject to a minimum rate of tax of 1%, or a minimum of 3% where the additional dwelling surcharge applies.
HMRC had issued a SDLT consultation in November 2021 in respect of mixed property and MDR, having identified these as being two areas of SDLT where “the current rules are leading to potentially unfair outcomes, incorrect claims, or abuse of the rules.” They advised that they had seen acquisitions claimed to be mixed-property transactions despite the acquisition not containing any meaningful non-residential aspects, and incorrect claims for MDR, in particular in relation to what are purported to be ‘annexes’ to single residential properties.
The responses to this consultation have now been published and, in relation to mixed-property purchases, the Government has decided not to take forward any changes to the SDLT rules. In relation to MDR, the Government has concluded that the relief is not meeting its original objectives of supporting investment in residential property and the private rental sector in a cost-effective way, hence its decision to abolish MDR.
Registered Social Landlords
With effect from 6 March 2024, legislation will be introduced in Spring Finance Bill 2024 to amend out of date references and definitions in SDLT legislation relating to registered social landlords, and to remove public bodies from the SDLT 15% higher rate charge when purchasing residential property with a value of more than £500,000.
The changes clarify and align the legislation with existing HMRC guidance and are not expected to impact the practical tax analysis of relevant transactions. The revisions to section 71 Finance Act 2003 specify that:
- A recycled subsidy is a qualifying subsidy; and
- English local authorities which are registered providers can benefit from the relief.
First-time Buyers’ Relief on leases when using a nominee or bare trust
Spring Finance Bill 2024 will amend the rules for claiming First-time Buyers’ Relief from SDLT in respect of leases and nominees. The changes will mean that individuals who enter into new leases using nominee or bare trust arrangements will be able to claim the relief, which was previously not possible. This measure appears to be aimed at victims of domestic abuse who wished to use such arrangements to prevent former partners from finding their new address were unable to claim relief.
Introduction of tax rules for Reserved Investor Funds
The government will introduce legislation in relation to Reserved Investor Funds(“RIF”). The proposals follow a consultation on the scope and design of a tax regime for a RIF published in April 2023, the response to which was published at the Spring Budget 2024.
An RIF is designed to complement and enhance the UK’s existing funds regime, by providing a UK based unauthorised contractual scheme with lower costs and more flexibility than the existing authorised contractual scheme regime. The intention is for the tax treatment of an RIF to be non-distortive and tax neutral, such that an investor investing through an RIF will be in a similar tax position to if they had invested in the underlying assets of the funds directly. Where possible, the tax rules will replicate the existing tax rules applying to Co-ownership Authorised Contractual Schemes (“CoACs”). This is expected to amend the SDLT legislation surrounding the current CoACs rules; legislation is to follow and we will continue to provide updates on this.
If you would like to discuss any of these issues further, please get in touch with Rachael Thomson-Curtis or your usual PwC Stamp Taxes contact.
