Multiple Dwellings Relief (no ADS payable)
Company A acquires 8 flats with 2 ground floor shop units for £1,250,000. The chargeable consideration attributable to the shops is apportioned on a just and reasonable basis to be £250,000.
As this transaction involves the acquisition of six or more dwellings, relief for purchases of six or more dwellings (see LBTT10040) will be available therefore Additional Dwelling Supplement (ADS) will not be included in any part of this calculation if the relief is claimed.
The amount of tax due in relation to the transaction is:
(DT x ND) + RT
where:
DT is the tax due in relation to a dwelling
ND is the number of dwellings
RT is the tax due in relation to remaining property
Calculation of DT
Tax due in relation to a dwelling:
Step 1 – Find the total consideration attributable to dwellings.
This is £1,000,000.
Step 2 – Divide the total consideration attributable to dwellings by the number of dwellings.
£1,000,000 / 8 = £125,000
Step 3 – Calculate the amount of tax due in relation to a dwelling using the chargeable consideration from step 2, using tax rates and bands for residential transactions.
Residential dwellings under £145,000 incur no tax.
So (DT x ND) in this case is zero.
Calculation of RT
Step 1 – Calculate the amount of tax that would be due in respect of the transaction in the absence of the relief.
The 8 flats and 2 shops are chargeable at non-residential rates.
The total tax chargeable for the transaction, based on a chargeable consideration of £1,250,000 calculated at non-residential rates, is therefore £46,500.
Step 2 – Divide the consideration attributable to remaining property by the chargeable consideration for the transaction.
i.e. 250,000 / 1,250,000 = a fraction of 1/5th
Step 3 – Multiply the amount calculated in step 1 by the fraction reached in step 2.
i.e. £46,500 x 1/5th = £9,300 i.e. the tax due in relation to remaining property (RT).
Applying the minimum prescribed amount of tax to the part of the transaction relating to dwellings
Where DT x ND is less than the minimum prescribed amount, the amount of tax chargeable in relation to the relevant transaction is:
MPA + RT
where:
MPA is the minimum prescribed amount, and
RT is the tax due in relation to remaining property.
Calculating the minimum prescribed amount
The minimum prescribed amount (MPA) is 25% of:
TT – RT
where:
TT is the amount of tax that would be due in respect of the transaction but for the relief; and
RT is the tax due in relation to remaining property
As determined in Step 1 of ‘Calculation of RT’, the amount of tax that would be due in respect of the transaction but for the relief is £46,500. TT is therefore £46,500.
As determined in Step 3 of ‘Calculation of RT’, the amount of tax due in relation to remaining property, RT, is £9,300.
The minimum prescribed amount (MPA) is therefore 25% of £46,500 - £9,300 = £9,300
Because DT x ND (£0) is less than MPA, the amount of tax that is chargeable in relation to the transaction (after the application of multiple dwellings relief) is:
MPA (£9,300) + RT (£9,300) = £18,600
The minimum prescribed amount of 25% is provided for in The Land and Buildings Transaction Tax (Prescribed Proportions) (Scotland) Order 2014.
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