Plans to abolish multiple dwellings relief (MDR) will worsen the UK’s housing crisis as thousands will lose their jobs, property experts have warned.
MDR is a form of stamp duty land tax (SDLT) relief which can reduce the amount of SDLT paid when buying two or more residential properties in the same or a linked transaction.
Chancellor Jeremy Hunt said the stamp duty relief was intended to support investment in the private rental sector.
However, he announced in the Spring Budget that MDR would be abolished following a Governmental external evaluation which found there was “no strong evidence” that the regime was meeting its original objectives.
As a result, MDR will be abolished for transactions from June 1, 2024. Scrapping the relief will raise £385million per year for the Treasury by 2028-29, according to official estimates.
In a letter to the Chancellor, dozens of real estate groups, trade bodies and property firms said they were “deeply concerned” about government plans to cut tax relief in July for bulk purchases of properties.
Hunt said the stamp duty relief was intended to support investment in the private rental secto
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The British Property Federation and investment firm CBRE have said that its removal could result in between 13,000 and 25,000 homes not being built.
They added that the development of these properties would have supported up to 60,000 jobs.
Increasing the tax burden will worsen the UK’s housing crisis as it would stop investors putting large amounts into new rental homes, according to property experts.
According to the letter seen by The Telegraph, the new properties built for renting are appraised based on the value they could be sold for, reflecting any costs the buyer would have to pay, including stamp duty.
The signatories said removing the tax break would therefore discourage the building of new homes.
They urged the Treasury to retain the tax break for large-scale residential property acquisitions.
Matt Spencer, tax partner at Kingsley Napley LLP, likened the measure to abolish MDR as a sledgehammer to crack a walnut.
He said: “It’s clearly true multiple dwellings relief has been abused, but abolishing it feels like a sledgehammer to crack a nut. While this will end the abuse of spurious ‘granny flat’ claims, it will also prevent some legitimate investors from investing.
“It will now be much harder to find an investor willing to buy those four flats above a parade of shops.
“The negative impact of this change, however, is greatly mitigated by the ability to claim commercial SDLT rates on purchases of SIX or more dwellings, and so bearing that in mind, the measures, on balance, seem a good thing.”
But while Spencer believes this abolition is heavy handed, on balance, he feels “it does far more good than harm”. He points to the fact that there are businesses whose sole activity is to make amends to SDLT returns to claim multiple dwellings relief.
An external evaluation for the Government found that 51 per cent of multiple dwellings relief claims were made by private individuals buying properties for personal use.
But the signators argued that this evaluation “missed the larger and more significant point of just how important it is to be able to plan development on the basis that [multiple dwellings relief] will be available in the future”.
An HM Treasury spokesman said: “Our decision to abolish multiple dwellings relief follows an external evaluation that found there was no strong evidence it was supporting investment in the private rented sector.
“Over half the total claims of the relief were from private individuals and HMRC also found a high number of abusive claims.
“Investors buying six or more properties in a single transaction can still pay the non-residential rates of stamp duty land tax, and we continue to engage with the build-to-rent sector to understand concerns.”
