Multiple dwellings relief is a partial relief from LBTT. The relief ensures a buyer, or buyers, are not charged tax at a higher rate band when a single or linked transaction includes more than one dwelling which, if bought separately, lower rate bands would have applied. The relief ensures that in all cases a minimum prescribed amount of tax is charged on transactions involving multiple dwellings.
It is for the buyer/s to decide whether or not to claim MDR for their specific transaction or linked transactions.
The relief applies to relevant transactions.
A single transaction is a relevant transaction if its main subject-matter consists of an interest in at least two dwellings or an interest in at least two dwellings and other property.
A linked transaction is a relevant transaction if its main subject-matter consists of an interest in a single dwelling or an interest in a single dwelling and other property, it is one of a number of linked transactions and the main subject-matter of at least one of the other linked transactions consist of an interest in one or more other dwellings.
The relief is available on transactions that include both dwellings and non-residential properties when a single transaction includes two or more dwellings plus non-residential property or when a linked transaction includes a single dwelling which links to at least one other transaction that includes at least one other dwelling and non-residential property in any of the transactions.
The relief does not apply to land transactions which are leases for the purposes of LBTT(S)A 2013 Schedule 19.
The relief cannot be claimed if crofting community right to buy relief is available for it. Additionally, the relief cannot be claimed if group relief, reconstruction relief and acquisition relief or charities relief is available for it or has been withdrawn from it.
The dwellings are, in relation to the relevant transaction, the dwelling or dwellings that are, or are part of, the main subject-matter of the transaction. An interest in a dwelling is to any chargeable interest in or over a dwelling.
A building or part of a building counts as a dwelling if it is used or suitable for use as a single dwelling or it is in the process of being constructed or adapted for such use.
‘Dwelling’ does not have a defined meaning for LBTT. Revenue Scotland use the everyday meaning of ‘dwelling’ which is:
- a building, or a part of a building, that gives those who use it the facilities required for day-to-day private domestic living and a sufficient degree of permanence.
No single factor will determine the suitability for use as a dwelling although factors to be considered include:
- Physical configuration of the building including independent access
- Bathroom facilities
- Kitchen facilities
- Accommodation for living and sleeping
- Security, including lock and door type
- Degree of permanence
- Control of utilities
Land that is, or is to be, occupied or enjoyed with a dwelling as a garden or grounds (including any building or structure on such land) is taken to be part of that dwelling. Land that subsists, or is to subsist, for the benefit of the dwelling is taken to be part of the dwelling.
The main subject-matter of a transaction is also taken to consist of or include an interest in a dwelling if:
- substantial performance of a contract constitutes the effective date of that transaction by virtue of a relevant deeming provision (Section 10 – substantial performance without completion – or 11 – contract providing for conveyance to third party – LBTT(S)A)
- the main subject-matter of the transaction consists of or includes an interest in a building, or a part of a building, that is to be constructed or adapted under the contract for use as a single dwelling, and
- construction or adaptation of the building, or the part of a building, has not begun by the time the contract is substantially performed.
Evidence should be available to show that a property meets the suitability to be considered a dwelling.
Considered to be a dwelling
- Where a large house has been split into three separate flats this will be defined as three dwellings;
- A dwelling on a site to be refurbished or demolished would count as a dwelling, other than in the case of a derelict property see LBTT4012 The Meaning of non-residential;
- Holiday homes/lets, including those which cannot be used all year round, will be residential property and therefore dwellings;
- A property used as part of a furnished holiday letting business will be a residential property whether the property is assessed to Council Tax or Non-Domestic Rates, as in most cases the building could be used as a single dwelling house without permission from the relevant local authority.
Not considered to be a dwelling
- A cleared site with no buildings would not count as a dwelling even if it had planning permission for the construction of residential property.
- Caravans, mobile homes or houseboats will not normally be considered as dwellings unless they become sufficiently fixed to the land that they become part of the land. In such cases, these may be a dwelling if they meet the normal definition.
The specific inclusions and exclusions provided for at Section 59(3) – Section 59(6) are used for the purposes of multiple dwellings relief in the same way they applied when determining if a property is a residential property under Section 59(1)(a).
For further guidance see:
MDR can be withdrawn in full should an event occur within the relevant period that, if it had occurred immediately before the effective date, the relief would not have been due.
Where relief is fully withdrawn, the amount of tax chargeable is the amount that would have been chargeable in respect of the transaction but for the relief.
MDR can be withdrawn in part should an event occur within the relevant period that, if it had occurred immediately before the effective date, the relief would have been due but more tax would have been payable.
Where relief is partially withdrawn, tax is chargeable on the transaction as if the event had occurred immediately before the effective date of the transaction. The tax is calculated by reference to the rates and bands in force at the effective date of the transaction.
The relevant period is the shorter of:
- the period of 3 years beginning with the effective date of the transaction,
- and the period beginning with the effective date of the transaction and ending with the date on which the buyer disposes of the dwelling, or the dwellings, to a person who is not connected with the buyer.
An event includes any change of circumstance or change of plan, including a change to the dwellings e.g. purchasing two separate dwellings then combining them into one dwelling within the relevant period. If this had occurred immediately prior to the effective date the criteria to claim MDR would not have been met.
Any withdrawal of MDR may in turn impact on the Additional Dwelling Supplement.
For a contract that was substantially performed prior to its completion, the relevant period will refer to the date the contract was substantially performed as the effective date.