Spring Budget: PwC comments on Housing and Stamp Duty Land Tax

Commenting on the Housing and Stamp Duty Land Tax measures announced the Chancellor’s Budget, 

James Bailey, Housing Leader at PwC UK, said: 

"Any positive interventions in today's Spring Budget around housing were notable in their absence. Measures in relation to reduced capital gains tax and scrapping tax breaks on furnished holiday lettings could bring more properties into mainstream use, but the impact would be expected to be minimal. The changes to multiple dwellings relief could have an adverse impact on attracting much-needed institutional investment into the growing the build-to-rent market. 

"Fundamentally, the focus should be on creating the conditions to address long-term undersupply. Regarding the short term, today's budget was a missed opportunity to provide a boost to both young aspirational homeowners and the SME supply chains dependent on a thriving residential development market."

Adam Yates, PwC Real Estate Tax Network Leader, adds:

“Whilst significant investment in housing delivery was expected, a specific allocation of £118 million to accelerate delivery of the Canary Wharf scheme will no doubt be a welcome announcement for the business and financial district. The funding will help deliver further life sciences, commercial and retail floor space, a healthcare diagnostic facility as well as homes.

“In addition, following a consultation last year, it is confirmed that the Government will proceed with legislation this Spring to establish the Reserved Investor Fund as a new UK investment fund vehicle. One of the main drivers for this proposal has been the desire to have a “less regulated” onshore fund vehicle to hold UK Real Estate, which is income transparent, but with certain Stamp Duty Land Tax (SDLT) and capital gains tax advantages.”

Stamp Duty Land Tax

Aidan Coleman, Director and Stamp Taxes Leader at PwC UK, adds: 

“Although HMRC undertook a consultation in 2021/22 which sought views on achieving fairer tax outcomes and preventing abuse in relation to Stamp Duty Land Tax (‘SDLT’) on Multiple Dwellings Relief (‘MDR’) and ‘mixed property purchases’, the removal of MDR in the Spring Budget was not widely trailed.

“MDR can be applied to certain transactions involving bulk purchases of dwellings to reduce the effective rate of SDLT, and was introduced to encourage the release of homes into the private rental market. Given the volume of HMRC litigation and enquiries over recent years in respect of potential abuse of MDR, it does not come as a surprise that HMRC sought to review its continued use. The decision to abolish MDR has been reached following conclusions reached by research agencies commissioned by HMRC, deeming that the relief is not achieving its original objectives.

“This change shows HMRC’s continued focus on areas where they consider there to be risk of abuse of relevant tax law and reliefs. However, although there are other ‘overlapping’ SDLT reliefs and regimes, this will increase the tax cost associated with certain property transactions involving multiple dwellings.

“As MDR will continue to apply to transactions completing before 1 June 2024 (or exchanged on or before 6 March 2024), purchasers with live transactions will need to take care in respect of establishing the correct SDLT position.

“It should also be noted that SDLT applies only to transactions in property in England and Northern Ireland. MDR in Land & Buildings Transaction Tax and Land Transaction Tax, in respect of property in Scotland and Wales, respectively, currently remains in place and unchanged.”