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Multiple Dwellings Relief (MDR) is a much sought-after tax relief which can significantly lower your Land and Buildings Transaction Tax (LBTT) bill when purchasing more than one dwelling in Scotland. It’s especially of interest to developers, landlords, or anyone purchasing mixed-use developments or a portfolio of houses.
One of the more common questions today is whether, even after MDR was abolished in England and Northern Ireland, was it also applicable for Scotland? Well, in contrast to SDLT in England, LBTT only functions in Scotland and is managed by Revenue Scotland. MDR entered to reduce the taxation burden in circumstances where there were multiple units under one deal.
Who Is Eligible?
You are eligible for MDR in Scotland if:
- You’re purchasing more than a single residential property under one deal
- The purchase includes annexes or granny flats as separate homes
- You’re purchasing a portfolio of buy-to-let homes or HMOs
The relief works by calculating the average price per dwelling, then applying LBTT rates to that figure and multiplying it by the number of dwellings—normally resulting in a lower tax liability than if the whole purchase were one dwelling.
This relief has been especially useful to property investors and landlords buying multiple flats in one building or estate. Even buyers of houses who buy a property with an annex that is self-contained for relatives might be eligible.
Conditions and Calculations
To be eligible for Multiple Dwellings Relief Scotland, each unit must be a “dwelling,” i.e., habitable as a dwelling house. Sharing of common entrances or kitchens might affect eligibility. Properties with mixed use like residential and commercial would be eligible partly or require special consideration.
Example: Buying 3 flats for £900,000 total. Without MDR, you pay LBTT on the entire amount. With MDR, the average price per home is £300,000—taxed separately then multiplied by 3, which normally equals savings.
Buyers are also to be aware of MDR’s minimum LBTT cap. Although the computed LBTT might turn out to be lower than regular rates, there is a figure to be paid a minimum per property, so the tax has a benchmark level it needs to be at.
How to Claim
Claim MDR with the time you submit LBTT return. You can’t reclaim retrospectively unless you submit your return beyond the period permitted. Ensure:
- Each unit meets the definition of a dwelling
- You retain proof supporting the claim
- You submit the claim with the LBTT return
Professional valuation reports and architectural drawings may support your case if Revenue Scotland makes the claim. In more complicated cases, it is highly recommended to seek the advice of a tax advisor knowledgeable in Scottish property law.
It is also a good idea to create a clear schedule with each dwelling, its worth, and how the mean price was determined. This clarity will avoid delays in processing your LBTT return and will add weight to your argument in the case of an audit.
Conclusion
Multiple Dwellings Relief is a strategic way of lowering LBTT for property buyers and investors in Scotland. With understanding of the terms, making precise calculations, and presenting proper documentation, you can efficiently save to the lawful maximum.
Given the nuances involved, early planning and advice from a property tax expert can be the difference between a successful claim and a costly oversight. If you’re exploring portfolio expansion or acquiring properties with annexes, MDR is well worth your consideration.
