SDLTM29979 | Relief for transfers involving multiple dwellings: Example 6

The freehold of a building divided into six flats is purchased for £1.2 million and relief is claimed. The flats are let on Assured Shorthold tenancies but, two years later, the tenancies cease and the purchaser begins work to convert the building into a hotel.

At the time of purchase, the transaction is a relevant transaction as it involves the acquisition of more than one dwelling - i.e. the superior interest in six flats where the term of the lease is 21 years or less. The rate of tax is set by the total consideration given, divided by the number of dwellings. The higher rate for additional dwellings will be applicable. More information about the higher rate can be found at SDLTM09730. The non-resident rates of SDLT may also be applicable if any purchaser is not UK resident. More information about the non-resident rates can be found at SDLTM09860.

When conversion work starts (within three years of the effective date of the transaction), the flats cease to be suitable for use as dwellings. The change is deemed to have taken place immediately before the purchase so the transaction ceases to be a relevant transaction. The rate of tax is now set solely by the consideration given. The subject-matter of the transaction is now non-residential

The purchaser is required to make a further return and pay additional tax within 30 days of conversion work starting.