The Chancellor has abolished multiple dwellings relief for stamp duty land tax.

Relief from SDLT for multiple dwellings in England and Northern Ireland (MDR) will be abolished for transactions which complete or substantially perform on or after June 1 this year. 

However relief will continue beyond this date where contracts have been exchanged on or before the date of the Budget – last week on March 6 – provided there was no variation to the contract after that date.

MDR was introduced to reduce a potential barrier to investment in residential property and promote private rented sector supply – but it didn’t really work.

An HMRC study shows that it didn’t attract investors in significant numbers but it did open itself to some abuse.

The National Residential Landlords Association says: “This is not a widely used relief, its removal is unlikely to have a destabilising effect, but at a time when the Treasury says it wants to encourage investment it seems odd to remove a fiscal tool which may help make a small number of properties more cost effective to bring to the market.”

However, tax specialist Kingsley Napley says: “There are businesses whose sole activity is to make amends to SDLT returns to claim MDR. Perhaps inevitably, some of those claims have been spurious, and it is something that is very labour intensive for HMRC to oversee.

“Caselaw has also struggled to draw an accurate line between what is one dwelling and what is two. It is clearly an overly burdensome system for HMRC to police.”

And the firm adds: “The ability for those buying the kind of luxury house that legitimately includes more than one ‘dwelling’ to reduce their SDLT is not something many people will disagree with.

“By abolishing the rule, however, it will impact a relatively small number of legitimate transactions. The investor buying multiple flats, for example, will now be at a disadvantage unless they can buy at least six (and claim commercial SDLT rates). The rules therefore will now disadvantage certain investors.

“The change in rules also, in a roundabout way, closes down the “loophole” that allowed those purchasing commercial property alongside multiple dwellings in a single transaction to pay sometimes very low SDLT rates (sometimes close to 1%).”