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Multiple Dwellings Relief on Student Accommodation

Published by UK Property Accountants
Published Date: January 5, 2023

Did you know you could be buying two different residential properties with the same purchase price and still pay less Stamp Duty and Land Tax (SDLT)?

This can be achieved by through various reliefs that are in place for Stamp Duty and Land Tax but the one we are focusing on in this article is Multiple Dwellings Relief.

Three Types of Student Accommodation 

  1. Student hall of residence owned by educational establishments,
  2. Residential accommodation other than “hall of residence” and,
  3. Ordinary residential accommodation let for students.

Let’s dive into them one by one!!

01
Student hall of residence

This type of student accommodation is owned by educational institutions such as universities and often sits on the campus of the educational institutions or near it. Students can only live in the building if they attend the educational establishment.

Student halls of residence are always considered non-residential property, so MDR is unavailable.

02
Residential accommodation for students other than student halls of residence

Residential accommodation for students other than student halls of residence provides accommodation facilities to only students educational institutions do not own it; rather, companies own it.

These kinds of student accommodations are exempt from higher rate stamp Duty and Land Taxes (SDLT).

 Multiple Dwellings Relief (MDR) might be applicable here.

03
‘Ordinary’ residential accommodation

‘Ordinary’ residential accommodation are residential accommodations used by students but unlike “residential accommodations for students”, there is no obligation to provide the facilities to only students.

Properties such as House of Multiple Occupation (HMO) can come under this category.

Similar to residential accommodation to students, Multiple Dwellings Relief might be applicable.

Now that we are familiar with student accommodations and its types let’s dive Multiple Dwellings Relief.

When can a Student Accommodation be counted as a separate dwelling?

Facilities of dwelling is very important in determining how many dwellings there are.

Following are few basic criteria for a dwelling to qualify for a separate dwelling:

  • Suitability for use as a dwelling: Each dwelling should provide students with basic domestic living needs such as a sleeping area, living area, kitchen, bathroom, etc. the idea is that the dwelling can exist independently.
  • Independent Entrance: Each dwelling must have a separate entrance; this can be a separate entrance from the common part of the building or outside the building.
  • Privacy: There must be a degree of privacy for each dwelling from another. For example, any door interconnecting between two dwellings must be locked from both sides to ensure privacy.
  • Control utilities: A single dwelling must have access to basic utilities such as water, heating, electricity, etc.; each dwelling must be able to control utilities provided to them.
  • Separate bills and posts: Though separate letter boxes, bills etc., can act as strong evidence for separate dwellings, it is not conclusive. Lack of it will not be a deciding factor on whether a separate dwelling exists. 

The aspects mentioned above are considered important; the lack of one of them can cast significant doubt on whether the area in question could be considered suitable for use as a separate 'single dwelling'.

Learn More Here: Multiple Dwellings Relief - A Complete Guide.

Examples of Student Accommodation with Multiple Dwellings:

Example 1, 

A company purchases a block of flats for students only. There are separate lockable entrances on each floor from the common staircase. Once you enter the door, each floor has several study bedrooms with attached bathrooms, one kitchen, and a common room. In addition, each floor has access to utilities such as water, electricity, heating, etc. Since these blocks of flats can exist independently, each floor in this building qualifies for a separate dwelling.

Example 2, 

Individual study bedrooms that do not afford students the cooking and other facilities required for private domestic existence do not qualify as a dwelling.

Whereas a block of purpose-built or adapted self-contained student flats does for relief.

Student Accommodation Qualifies for Multiple Dwellings Relief, but How Much can I Save?

How much you can save depends on several factors such as number of dwellings, purchase price, applicable SDLT rate, etc.

Let us understand this using example.

Mr. A purchases a building with 4 flats for students only at a consideration of £1.2 million.

There are separate lockable entrances on each floor from the common staircase. Once you enter the door, each floor has several study bedrooms with attached bathrooms, one kitchen, and a common room.

In addition, each floor has access to utilities such as water, electricity, heating, etc. Therefore, each floor in this building qualifies for a separate dwelling.

  • Without MDR, the SDLT for the transaction, including the 3% surcharge, would have been £97,250.
  • If MDR is claimed, the SDLT payable would be £46,000.
  • MDR reduces the SDLT payable by £51,250.

SDLT rates applied in this calculation are based on the rates for the tax year 2021/22

47%
Payable
53%
Saving

Multiple Dwellings Relief (MDR) Calculator

Introducing the first of its kind, our in-house MDR calculator. Be the first to know a potential savings you could make on the your SDLT!

Conclusion

We understand the house you want to purchase may differ from the one we discussed above.

There is no straightforward answer as to whether a student accommodation can qualify for Multiple Dwellings Reliefs. It depends on the property's structure and use, which can be tricky to identify.

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