Landlords could rush to take advantage of a little-known stamp duty loophole after the Chancellor this week denied large investors a carve-out on future hikes in the tax.
The Chancellor announced a 3 percentage point stamp duty surcharge on second homes and buy-to-let properties in the 2015 Autumn Statement.
The Treasury then consulted on exempting corporate landlords with 15 or more properties from the increased rates.
However, this week’s Government consultation response said the higher rates will be applied to all buyers regardless of size from 1 April.
But in an email to consultation respondents, seen by Money Marketing sister-title Mortgage Strategy, the Treasury says that landlords can claim multiple dwellings relief to offset the lack of stamp duty carve-out for those bulk purchasing six or more properties.
The email says: “The Government also 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.”
An HM Revenue & Customs statement put out this week says: “Where two or more dwelling are purchased in a single or linked transaction multiple dwelling relief (FA2003/Schedule 6B) can be claimed. The higher rates will apply to claims for multiple dwellings relief.
“Where 6 or more dwellings are purchased in a single transaction the purchaser can choose whether to apply the non-residential rates of SDLT.”
The relief can cut stamp duty by a hefty margin. As an 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.
The £30,000 figure is worked out by taking the average flat price of £100,000, multiplying by 3 per cent and then dividing by the number of flats.
Mortgage experts say the tax relief is not well-known but could now see wider uptake.
Bill Warren Compliance founder Bill Warren says: “I don’t think this is very widely known at all. It just comes down to the quality of advice that 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 says: “I doubt that many mortgage advisers will be aware of such a relief. I just wish that HMRC would publish a definitive guide to what is or isn’t available, as all of the uncertainty surrounding tax changes is damaging for the market.”
John Charcol senior technical manager Ray Boulger says: “It is not so much the Treasury offering investors an olive branch, as it is bringing people back to where they should be anyway.
“So my interpretation of that comment is the Treasury saying ‘look, we are effectively already giving people who are buying more than six properties the opportunity to save on stamp duty’.”
But Young says: “In terms of what use it is to people, the short answer is that 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.”