Tax Partner and Chair of the Chartered Institute of Taxation’s Property Taxes Committee, Marc Selby warns of the potential risks and unfairness in HMRC’s proposals to amend the rules for claims for SDLT multiple dwellings relief (MDR) and the SDLT treatment of “mixed-use” property.
HMRC’s proposals are contained in a consultation document published in November 2021 and Marc’s comments on the proposals were included in a press release published by the Chartered Institute of Taxation on 28 February.
MDR is a valuable relief which can significantly reduce the SDLT charge on the purchase of a residential property which includes two or more separate dwellings and SDLT on purchases of “mixed-use” properties will generally be charged at much lower rates than those charged on properties which are entirely residential.
However, MDR claims and SDLT returns based on “mixed-use” rates can be contentious and subject to challenge by HMRC. HMRC are proposing to change the rules because of the proliferation of SDLT reclaim agents who are encouraging purchasers to submit claims for SDLT refunds on the basis that the return should be amended to include an MDR claim (which was not included in the return) or to recharacterize the property as “mixed-use”. Many such refund claims are of questionable merit and HMRC has successfully challenged such refund claims in the Tax Tribunals, and more recently in the Court of Appeal.
The Chartered Institute of Taxation considers that HMRC are justified in seeking changes to the rules on MDR claims and “mixed-use” property, but warns that the proposed changes involve risk and unfairness. Details of HMRC’s proposals are summarised in the Institute’s press release.
Marc Selby considers it likely that some of the proposals will be implemented, possibly with effect from the Autumn budget. Clients purchasing mixed-use property or wishing to claim MDR should seek specialist advice.
