Every adult in the UK pays property taxes, such as stamp duty land tax, on transactions where the value is above certain thresholds.

Some residential transactions qualify for reliefs that reduce the amount of tax homeowners pay or, in some cases, mean they pay nothing at all.

For example, a first-time buyer in England or Northern Ireland pays no stamp duty land tax as long as their purchase price is less than £300,000.

A similar tax relief is available when a qualifying taxpayer buys more than one dwelling - a flat, house or other residence - in a single transaction.

Multiple dwellings relief allows stamp duty rates to apply to the average value of the collective properties, rather than the total purchase price.

At least two dwellings must be bought in a single transaction, or as part of a series of linked transactions between the same vendor and purchaser.

This enables buyers to benefit from multiple nil-rate and lower percentage bandings, significantly reducing their stamp duty land tax liability.

However, HMRC suspects multiple dwellings relief is open to abuse and the tax authority could revamp the rules in the coming months.

Multiple dwellings

A 12-week consultation closes on 22 February 2022, with HMRC seeking feedback on proposals to crack down on abuse.

On the face of it, this crackdown appears to centre on introducing restrictions on homeowners from obtaining the relief.

HMRC could restrict the relief so it can only be claimed if all properties are, or a single property is, bought for a qualifying business use.

Alternatively, the tax authority could introduce a subsidiary dwelling rule to prevent smaller subsidiary dwellings, such as a ‘granny annex', from qualifying for the relief due to their size or value.

The other option is for the relief to only apply to purchases which include three or more dwellings, meaning a lot of properties could potentially fall outside of scope for the relief.

Mixed-use properties

Mixed-use properties are those which consist of both residential and non-residential uses, such as a flat above a shop or pub.

Purchases of these properties in England and Northern Ireland are subject to stamp duty land tax at the non-residential rates.

These rates offer lower stamp duty land tax bands and are not subject to any surcharge, like the extra 3% charged on purchases of second homes.

That has led to HMRC believing some buyers have gained from including token amounts of non-residential property within residential purchases.

To close this loophole, either a new apportionment basis or a new threshold, so that more than 50% of the purchase must include non-residential property to qualify as mixed-use, could kick in.

When could this happen?

Any reform of stamp taxes and multiple dwellings relief in England and Northern Ireland will not take effect in time for the 2022/23 tax year.

HMRC has to assess the responses to the consultation and publish a report within 12 weeks, so that should be out around mid-May 2022.

Assuming the next Budget speech isn't until the autumn, any formal announcement could be included then.

It would then need to be written into the next Finance Bill ahead of the reforms potentially kicking in from April 2023.

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