Since 2011, multiple dwellings relief (MDR) has been available to potentially reduce Stamp Duty Land Tax (SDLT) charges where a buyer purchases at least two residential properties (or purchases a dwelling that is linked to another property purchase). Where MDR is claimed, rather than paying SDLT on each of the transactions, SDLT is payable based on the mean chargeable consideration for the total transactions, subject to a 1% minimum of the total consideration.
MDR is always a key consideration for multiple or linked property purchases, however it may not always produce a reduced SDLT cost. Because of this, MDR must be claimed in order to apply, and is not usually claimed unless it does indeed produce an SDLT saving. Buyers can claim MDR within 12 months of filing the land transaction return for their purchase.
Being able to claim MDR after a purchase is useful if the buyer realises that they could have saved SDLT by claiming MDR after the event. However, scammers use this fact and the information about buyers and properties that is publicly available at HM Land Registry to cold-call buyers of multiple properties to "assist them" in claiming refunds of "unknowingly overpaid SDLT". These agents of course take a fee for such "assistance".
Some clients receive phishing letters informing them that with proper advice they could have, and should have, claimed MDR to save SDLT. This is of course not always correct.
HMRC noticed an uptake in such approaches to buyers, discovering that up to a third of these SDLT MDR refund claims are incorrect. In some cases they found agents proposing more aggressive schemes suggesting that a buyer could structure their purchase of a single dwelling as two and claim MDR to reduce the overall SDLT charge.
In its statement on the issue, HMRC notes:
HMRC raise enquiries on these claims, but sometimes that is after the agent has taken their fee, leaving the homeowner to pick up the difference. Incorrect refund claims must be repaid with interest, with some potentially facing penalties as well…
An agent making speculative claims… could be seen by HMRC to have breached [acceptable standards and behaviour]…
One-third is a significant proportion of failed MDR claims. However, some of those refunds will no doubt be innocently incorrect claims. Equally, this means that around two-thirds of such claims are legitimate and accepted, which is a sizeable majority. In many cases therefore, MDR is available and should be claimed where it would reduce an SDLT charge for the buyer, sometimes considerably.
In a changeable economy and property market, an MDR SDLT saving is given all the more reverence by buyers – and by scammers targeting them. It is therefore important to give due consideration to MDR when buying homes. However, extra care should be taken when approached by a stranger alleging to be your "SDLT guardian angel".
Our team of real estate tax experts at Mishcon de Reya is available to provide bespoke advice and assist with any MDR claims.