Relief for transfers involving multiple dwellings: Example 4
A 999 year headlease over five flats and four lock-up shops in a block is purchased for a premium of £1.25 million and annual rent of £6,000. Two of the flats are subject to 99 year underleases.
The transaction is a relevant transaction for the purposes of the relief as it involves the acquisition of more than one dwelling - i.e. the three untenanted flats. The lease premium is apportioned between the three untenanted flats (£750,000), the two tenanted flats (£100,000) and the four shops (£400,000).
The rate of tax on the premium attributed to the untenanted flats is set by the amount of that premium divided by the number of dwellings. This is £250,000 so the rate of tax is 1%. The tax due in respect of these flats is therefore 1% of £750,000 = £7,500.
The rate of tax on the premium attributed to the tenanted flats and the shops (£500,000) is set by the total premium (£1.25 million). As the transaction involves both residential and non-residential property, the rate of tax is 4%. The tax due in respect of these flats and shops is therefore 4% of £500,000 = £20,000.
Tax due on the net present value of the rent payable under the lease is calculated in the usual way. In this case the net present value is £165,739 and the tax due is 1% of £15,739 = £157 (rounded to the nearest pound).
The total tax due on the transaction is therefore £7,500+£20,000+£157 = £27,657.