View more on these topics

Landlords set to flock to stamp duty relief loophole

UK-Houses

Landlords will flock to use a little-known stamp duty relief option after the Budget denied large property investors a carve-out.

Chancellor George Osborne first announced a 3 percentage point stamp duty surcharge on second homes and buy-to-let properties in the Autumn Statement.

The Treasury then consulted on exempting corporate landlords with 15 or more properties from the increased rates.

However, last week’s Government consultation response said the higher rates will be applied to all buyers regardless of portfolio size from 1 April.

But in an industry email the Treasury says landlords can claim multiple dwellings relief to offset the lack of stamp duty carve-out for those bulk purchasing six or more properties.

Multiple dwellings relief was brought in by the Chancellor in his 2011 Budget.

A HM Revenue & Customs statement issued last week says: “Where two or more dwellings are purchased in a single or linked transaction multiple dwelling relief can be claimed. The higher rates will apply to claims for multiple dwellings relief.

“Where six or more dwellings are purchased in a single transaction the purchaser can choose whether to apply the non-residential rates of [stamp duty land tax].”

The relief can cut stamp duty by a substantial margin. For example, if a company bought 10 flats for £1m in total and claimed multiple dwellings relief, the firm would save £9,500 on a total stamp duty bill of £39,500.

Mortgage experts say the tax relief will be popular with larger landlords.

Mortgages for Business managing director David Whittaker says the system works best for those buying large property portfolios that would currently incur 12 per cent stamp duty charges, rising to 15 per cent when the surcharge hits.

He says: “For those landlords who will seek to incorporate into a limited company but are unable to gain a stamp duty exemption from going from private ownership to limited company, this would appear to be a legitimate way to mitigate a bulk sale of property.

“It will be a relatively small grouping, but it might allow those who this far have chosen not to go from personal or partnership to limited company to take another look at it. The key to this is getting good accountancy advice.”

Bill Warren Compliance founder Bill Warren agrees the tax relief will be welcomed by landlords.

He says: “I don’t think this is very widely known at all. It just comes down to the quality of advice the multiple owners have been getting from their accountants or tax specialists. If the opportunity is there I’m sure landlords and multiple buy-to-let owners will be rushing to it if they can save a few bob.”

Fleet Mortgages chief executive Bob Young says: “This falls under one of those headings where not a lot of people know about it and not a lot of people are taking advantage of it.”

Chadney Bulgin mortgage partner Jonathan Clark adds: “I’m sure the majority of landlords are now well aware of the impending changes to the tax treatment of their rental income and will be looking to mitigate this where possible.”

But some say the relief will not be widely used as landlords tend not to buy large portfolios.

Young says: “In terms of what use it is to people, the short answer is if you are buying an awful lot of property, then fine. But if you are buying, as most landlords tend to, one or so properties at a time, I’m not sure it’s much use to you. People don’t buy half a dozen in one go.”

Recommended

8

Osborne’s Lifetime Isa points to £7bn pension tax grab

Make no mistake about it – George Osborne’s Lifetime Isa is more than just a neat little wheeze designed to woo low-earners to vote Tory in 2020. It is a clear signal to the pensions industry that the current tax relief system is on its way out. The Chancellor was blocked from pursuing the radical […]

employee-focus-group

Five ways to make your employee focus group session a success

by Debra Corey, group reward director  You just planned and booked what you thought was the perfect vacation for you and your family. You call everyone together to share the great news and instead of receiving sounds of glee and delight, you receive groans and complaints.Your youngest says: “I hate beaches, didn’t you know that?” (You think to […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. While the SDLT multiple dwellings relief is a welcome option in reducing tax cost, restructuring of portfolio ownership by deferral of CGT through incorporation relief and ensuring there is no exposure to SDLT is a better option. But for any future acquisition, it would indeed be advisable that one builds capacity for multiple acquisition or negotiate significant discount to reduce the SDLT burden.

Leave a comment