New tax clampdown on landlords buying multiple proper...

The Labour-led government in Wales has issued a consultation proposing the abolition of Land Transaction Tax Multiple Dwelling Relief from June 1.

This would bring the Land Transaction Tax - the Welsh equivalent of stamp duty - in line with England and Northern Ireland, where multiple dwelling relief for stamp duty is already scheduled for abolition on June 1.

The Welsh proposal means that landlords purchasing more than one property from the same seller in a single transaction or linked transactions will no longer be able to claim back a proportion of their tax liability.

In a parallel with the stamp duty change, MDR is a partial relief of LTT which can be claimed when a buyer acquires more than one dwelling from the same seller, either in a single transaction on the same effective date or in linked transactions.

MDR was originally introduced to reduce a potential barrier to investment in residential property and to promote the private rented sector housing supply.

The change will involve the purchase of two or more properties but there’s also a so-called six property rule.

Currently, when buying six or more dwellings in a single transaction, the taxpayer can choose between treating the transaction as non-residential, and paying LTT at the non-residential rates, or treating the transaction as residential and paying the higher residential rates, in which case they can claim MDR.

If LTT MDR is abolished, taxpayer discretion in transactions involving six or more dwellings would end, and all such transactions would be charged at the non-residential rates.

Propertymark - the agents’ body - has commented on the Welsh six property proposal and says it could create unfairness for people buying between two and five dwellings in a single transaction, compared to those buying six or more dwellings. In some cases, those buying fewer properties might pay larger amounts of tax, as well as at a higher rate, than those purchasing more.

For example, if MDR wasn’t available a buyer acquiring five dwellings costing £300,000 per dwelling (total consideration of £1,500,000) would pay £171,200 in LTT at the higher residential rates, but a buyer acquiring six such dwellings (total consideration £1,800,000) would pay £85,750 in LTT at the non-residential rates.

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