Relief for transfers involving multiple dwellings: Example 8
A purchaser acquires the freehold of a block of eight flats for £1,000,000. Six months later he grants 99-year leases of two flats to unconnected third parties. After a further six months the remaining six flats are knocked together to make three flats.
The purchase is a relevant transaction as it involves the acquisition of more than one dwelling - i.e. the eight flats. The rate of tax is set by the total consideration given, ddivided by the number if dwellings. This is £125,000 the 0% band does not apply under the relief and the higher rate for additional dwellings will be applicable. More informaation about the higher rate can be found at SDLTM09730.
The grant of the leases is not an event which requires recalculation of the tax due, even though it occurs within the “relevant period” following the original purchase. Neither does it bring that period to an end as the whole of the interest acquired in that purchase has not been disposed of.
The combination of the six remaining flats to make three also takes place within the relevant period. This is a relevant event for the purposes of para. 6 so a recalculation is required. The event is deemed to have occurred immediately before the original purchase.
The rate of tax is now set by the original consideration of £1 million, divided by five - that is, the three combined flats and the two in respect of which leases were granted. The result is £200,000. The tax should be recalculated and if a futher amount is due the purchaser is required to make a futher return and make payment within 30 days.