HMRC Consults On Stamp Duty Land Tax

• Published date: 26 January 2022
• Subject Matter: Real Estate and Construction, Tax, Conveyancing, Real Estate, Property Taxes
• Law Firm: Andrew Jackson Solicitors
• Author: Ms Fiona Phillips

A recently released consultation paper published by HMRC highlights two areas of the Stamp Duty Land Tax ('SDLT') regime, which are causing particular compliance problems for tax payers, their advisors and conveyancers. In the paper, HMRC goes as far as saying that an industry of SDLT 'reclaim agents' has grown up to take advantage of the uncertainty in the rules, underlining the need for them to be addressed.

Multiple dwellings relief

The first area of concern surrounds multiple dwellings relief (MDR). If more than one dwelling is purchased in a single transaction, this relief allows the SDLT to be calculated based on the average price of each dwelling, instead of the total price. The calculation has the benefit of multiple uses of the nil rate band and the lower rates, therefore having the potential to reduce the SDLT charge considerably.

HMRC believes that the potential for a lower charge to SDLT has led some taxpayers to abuse the relief by interpreting the words used in the legislation - 'suitable for use as a dwelling' - widely. There is no definition of dwelling in the law, although there is now a body of case law, and HMRC cites examples of where claims to MDR have been made, including: -

• a typical suburban house where, after the purchase had completed, the buyer claimed that an integral garage, which included a toilet and handbasin, was capable of being used as a dwelling, and so MDR should have been claimed; and
• in a small, two bedroomed barn conversion, it was claimed post-completion that a utility room with a toilet was suitable for use as a dwelling and that the barn conversion was in fact two dwellings.

One of HMRC's concerns is where the conveyancing solicitor applies the rules correctly but following subsequent contact from reclaim agents, who often take a more aggressive interpretation of 'suitable for use as a dwelling', the purchaser seeks to make an unjustified negligence claim against the conveyancer.

Although HMRC has achieved some success at Tax Tribunal against MDR claims, the consultation document is seeking views from tax and conveyancing practitioners on ways in which MDR can be applied without interpretation of a dwelling.

HMRC's suggestions include: -

• allowing MDR only where all or some of the dwellings are being purchased for business use, such as for rental;
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