A new relief from Stamp Duty Land Tax was announced in the Budget 2011 and will come into effect from the date of Royal Assent to the Finance Bill (expected to be in July 2011). The relief will apply to transactions which include the acquisition of interests in more than one dwelling.
At present, if a purchaser buys more than one dwelling from a seller in a single transaction or in linked transactions (basically, a series of transactions or arrangements between the same purchaser and seller, or in either case persons connected with them), then the rate of SDLT which applies is determined by the overall consideration. For example, a purchaser acquires four flats from the same seller for a total price of £800,000 – the rate of SDLT applicable to a consideration of £800,000 is 4%, so the SDLT will be £32,000.
The result of this is that a purchaser acquiring multiple properties can pay a higher rate of tax then a purchaser acquiring a single property. This was seen as a barrier to investment in residential property, and this relief has been introduced to address the issue and to help strengthen demand for it.
The relief provides that the rate of SDLT which applies to the overall consideration will be determined by reference to the average consideration for each dwelling (i.e. the overall consideration divided by the number of dwellings). This is subject to a minimum rate of 1%.
So taking the example above, the rate of SDLT will be based on the average consideration for each flat i.e. £200,000. The rate of tax applicable to a consideration of £200,000 is 1%, so the SDLT payable will be 1% of £800,000, which is £8,000. This means that the purchaser will pay £24,000 less SDLT than under the current provisions.
The relief is also available where the transaction involves interests in other land (such as commercial property) as well as more than one dwelling, with the amount of the consideration attributable to the dwellings being treated as above.