Government confirms loophole in the new extra 3% stamp duty coming into force this week
An email by the treasury to 909 individuals has confirmed that large investors purchasing 6 or more properties in 1 transaction can by bypass the new extra 3% stamp duty increase. The loophole uses the ‘Multiple Dwelling Relief’ which is already law which applies to large investors. So bulk buying property significantly reduces the stamp duty tax.
“The Government … notes the existing flexibilities within the SDLT system available to significant investors in the property market, including multiple dwellings relief and the ability to pay the non-residential rates when purchasing six or more properties in the same transaction. Both of these flexibilities will remain” reads the Treasury’s email.
The HMRC website states:
You can claim relief when you buy multiple dwellings where a transaction or a number of linked transactions include freehold or leasehold interests in more than one dwelling.
If you claim relief, to work out the rate of tax HMRC charge:
divide the total amount paid for the properties by the number of dwellings
work out the tax due on this figure
multiply this amount of tax by the number of dwellings
The minimum rate of tax under the relief is 1% of the amount paid for the dwellings.
You buy 5 houses for £1 million in one transaction.
£1 million divided by 5 is £200,000.
The amount of SDLT you pay on £200,000 is £1,500 (0% of £125,000 + 2% of £75,000).
£1,500 multiplied by 5 is £7,500.
But that’s less than 1% of £1 million, which is £10,000. The amount of tax you pay is £10,000.