Specialist Property Tax Planning Services for Landlords and Property Investors 
sdlt, mdr
There was a change to the calculation of #MDR on mixed use property from Nov 20, so this is important to all our Property Tax clients. 
Scenario - acquiring a freehold mixed-use building in England for £850,000, consisting-of commercial premises on the ground floor and two separate, self-contained flats above (each valued at £200,000), that both have their own independent external access and after our detailed review, we consider that the flats do constitute separate dwellings for Stamp Duty Land Tax (#SDLT) purposes. 
The default SDLT position would be based on “non-residential” rates for a “mixed” property, but with an alternative calculation available based on a claim for Multiple Dwellings Relief (“MDR”) in respect of the two dwellings. 
1. The default calculation 
SDLT on the acquisition of mixed business/residential use property applies the same rates and bands for a fully commercial property (s.55, FA 2003), with the SDLT payable as follows: 
Total consideration £850,000 
First £150,000 @ 0% £0 
Next £100,000 @ 2% £2,000 
Balance (£600,000) @ 5% £30,000 
Total SDLT £32,000 
2. Claim for MDR 
A claim for MDR in respect of the dwellings requires the residential SDLT rates to be applied to the “consideration attributable to the dwellings” (paras 4 and 5, Sch. 6B, FA 2003). Previously, HMRC’s view was that this would also require the application of the higher 3% rates due for additional dwellings (Sch. 4ZA FA 2003), however they published a change of view on this issue in November 2020 in their SDLT manual as follows: 
“The following transactions will not comprise higher rates transactions and the higher rates will not apply. Purchases of: – 
non-residential or mixed residential and non-residential properties, except for a transaction which incorporates more than one dwelling, when 
a ‘Multiple Dwellings Relief’ claim is made in respect of the residential element of the transaction, and 
the non-residential element of the transaction is negligible or artificially contrived” 
On this basis, the SDLT due in respect of the two flats, using MDR, would be calculated as follows: 
(Consideration attributable to dwellings: £400,000) 
SDLT for each dwelling: 
Consideration £200,000 each 
First £125,000 @ 0% £0 
Next £75,000 @ 2% £1500 
SDLT with MDR (for both flats) £3000 
SDLT is payable on the remaining consideration for the commercial part as a fraction of the total payable for the whole building (calculated above) as follows: 
£32,000 x (£450,000/£850,000) = £16,941. 
The SDLT payable on the entire property under MDR is therefore £19,941 (giving a net saving with MDR of £15,059, compared with the default calculation above). 
Stamp Duty Land Tax applies to acquisitions of property in England and Northern Ireland; similar statutory rules apply for Land Transaction Tax in Wales; in Scotland, the additional dwelling rate (#ADS) applies specifically to the consideration for the residential part(s) of a mixed acquisition and the above advice would therefore not be relevant to purchases under Scottish Land and Buildings Transaction Tax (#LBTT). 
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