Multiple dwellings relief – hwyl fawr again?

With effect from 1 June 2024, multiple dwellings relief will be abolished in England and Northern Ireland. The ability to claim the mixed SDLT rates on purchases of 6 or more dwellings will, however, remain. 

The Welsh Revenue Authority is now considering what this means for the rules for multiple dwellings relief for the Welsh equivalent of SDLT, Land Transaction Tax, (the WRA's consultation paper can be found here) and if similar changes should be made. 

The WRA's consultation scope

The WRA's consultation asks for responses on:

1. The proposed abolition of LTT's MDR 
2. Whether abolition will impact the private rented sector in Wales
3. If the abolition will negatively impact others in Wales
4. In relation to transactions of 6 or more dwellings, whether the abolition of the mixed rates rule would fit with the Welsh Government's aims to (among others) raise funds fairly, be clear, stable, and simple, and make a more equal Wales 
5. If abolishing the 6 dwellings rule would discourage or prevent acquisitions of multiple dwellings and/or impact the private rented sector
6. Proposed amendments to provide relief for Welsh Local Authorities purchasing property in the same way relief from LTT is available for registered social landlords 
7. A broader question as to any other LTT rules and reliefs that respondents have any comments on. 

The consultation closed on 19 May 2024 and we await the WRA's response. 

STPG's response 

It is interesting to see the joint response of The Stamp Taxes Practitioners Group (STPG) and the Chartered Institute of Taxation (CIOT) (that can be found here). Focussing on the responses in relation to MDR and the 6 and more dwellings rules, the STPG and CIOT:

1. Note that the abolition of LTT MDR would broadly fill funding gap of £8million that will result from the reduction of the Welsh government's block grant 
2. Flag anecdotal evidence from members that individual buyers sometimes claim MDR without merit or claim firms pursue MDR with little regard for common interpretation of the law or flagging the risks involved 
3. Encourage an evidence based review of LTT returns to understand the likely impact of abolition of MDR on the private rented sector 
4. Float the idea of restricting MDR to “commercial” acquisitions so as to presumably carve out individuals but leave the relief available to commercial investors 
5. Note the potential adverse impact of abolishing the 6 or more rule particularly in relation to “investment and development of communal residential accommodation in Wales”. 
6. Explain that abolishing the 6 or more rule is mainly an issue around thresholds but that abolishing both MDR and the 6 or more rule might distort behaviour so that purchases are amended to incorporate small non-residential land so as to fall within the mixed LTT rates. 

In response to the wider request for any other comments on LTT, the STPG and CIOT raise three areas:

1. Charity relief - an apparent disparity in how the relief applies to rental income versus capital receipts used for furtherance of the charity 
2. Alternative finance - the lack of ‘look through’ in alternative finance arrangements to see the underlying buyer resulting in relief (such as charity relief) being denied 
3. Bare trusts - a rule that was carried across from SDLT (and still exists in the SDLT legislation) that has origins in a specific anti-avoidance provision but which impacts commercial lease transactions where a nominee is used and the nominee is treated as the lessor or lessee rather than the underlying beneficial owner 

Comment 

It will be interesting to see if the Senedd follow their neighbours across the Wye and abolish MDR. My suspicion is that they will as this neatly fills the funding gap created by SDLT's MDR abolition and ensures the continued alignment of SDLT and LTT. It also cuts out a swathe of MDR claims and amendments for smaller transactions that presumably take up a disproportionate amount of the WRA's time and resources. 

As to the 6 or more rule, I suspect this will not be abolished. Again this ensures alignment with the SDLT legislation and ensures that larger transactions continue to benefit from the mixed rates thus not putting investments in Wales at a disadvantage to those in England and Northern Ireland. 

However, it is of course within the Senedd's power to take a middle line or more nuanced approach as well as take account of the wider representations that will have been made to them as part of the mop-up questions at the end of the consultation. Watch this space. 

My suspicion is that they will [abolish MDR for LTT] as this neatly fills the funding gap created by SDLT's MDR abolition and ensures the continued alignment of SDLT and LTT.

https://assets-eu-01.kc-usercontent.com/220a4c02-94bf-019b-9bac-51cdc7bf0d99/ed4c89c3-c128-453b-8ec3-94b0ffcda45e/240516%20Proposed%20changes%20to%20land%20transaction%20tax%20reliefs%20-%20joint%20STPG%20CIOT%20response.pdf