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HMRC internal manual

Stamp Duty Land Tax Manual

Reliefs for transfers involving multiple dwellings: Example 7

A purchaser agrees to purchase the freehold of an uncompleted block of six flats for £1.2 million. The consideration is paid prior to completion. Six months later, the contract is varied to provide for construction of four larger flats. The consideration is unchanged.

The purchase was a relevant transaction as it involved the acquisition of more than one dwelling - i.e. the six flats. The contract was substantially performed when the full consideration was paid. The rate of tax was set by the total consideration given, divided by the number of dwellings. This was £200,000 so the rate of tax was set at 1%. The tax due at the time the contract was substantially performed was therefore 1% of £1.2 million = £12,000.

The variation of the contract is deemed to have taken place immediately prior to substantial performance. The rate of tax is now set by the consideration divided by the revised number of dwellings. This is £300,000 so the rate of tax is now 3%. The tax due is therefore 3% of £1.2 million = £36,000.

As the rate of tax has increased, the purchaser is required to make a further return within 30 days of the contract variation and pay the additional tax due of £24,000.

If however the number of flats had been increased, this change would be ignored for the purposes of SDLT.