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Flat conversion, Stamp Duty Land Tax (SDLT) and claiming Multiple Dwellings Relief (MDR)

by Raminder Uberoi — Posted on 5 June, 2020

Our guest blogger, Suzanne O’Hara explains the stamp duty (SDLT) liability and claiming multiple dwellings relief for flat conversions and splitting your freehold title into separate leases.

FAQs on Stamp Duty following flat conversion title splits and claiming Multiple Dwellings Relief (MDR)

In the second of our series of blogs relating to the splitting of your freehold title and converting your property into self-contained flats, we are pleased to introduce senior tax consultant, Suzanne O’Hara of Moore (N.I.) LLP. Suzanne is head of Moore (N.I.) LLP SDLT advisory service, providing specialist property tax advice to solicitors, private clients, accountants & other professionals and has advised many of our flat conversion clients.

In our first blog of this series, ‘The title split of your property and creating new leases‘ we discussed the practical and legal implications associated with splitting the legal title of your property and creating new leases.

As discussed in that article, the law stipulates that the freeholder and any leaseholder of a property must be separate entities., i.e. a lease cannot be granted to oneself. Accordingly, many advisers recommend the title being split using a limited company, so that the freehold and leasehold interest are effectively held by different entities. You can read more about the conveyancing process in transferring property into limited companies in our blog

However, the SDLT implications associated with such transactions can often be overlooked – and can have a very costly impact if not dealt with correctly.

In this article Suzanne looks at two real-life case studies where in both cases, the clients saved over £100,000 in stamp duty by obtaining her advice. This is followed by some very useful FAQs setting out the SDLT implications associated with such transactions, along with the potential pitfalls and planning opportunities.


Can you rely on the HMRC Online SDLT calculator when dealing with flat conversion transactions?

The HMRC Online SDLT calculator is designed to assist with the calculation of SDLT in basic scenarios. It should not be seen as a ruling by HMRC on the correct SDLT payable and importantly does not take into account any reliefs that may be available to reduce the SDLT. MDR is only one of many reliefs available to mitigate the SDLT exposure. The calculator also does not work for transactions involving 6 or more dwellings or corporate transactions involving single dwellings valued at over £500,000.


Flat Conversion Case study

Starck Uberoi Solicitors clients, Mr & Mrs X own a freehold property which has recently been converted into three flats. The market value of the freehold is estimated at £900,000 with an outstanding mortgage of circa £330,000. Following advice from a third party, they had planned to transfer the freehold to a limited company (in which they would be directors and hold 100% of the shares), which would subsequently grant 3 long leases back to the couple’s limited company.

Had the couple implemented this plan, without taking any action to ensure that specific reliefs were claimed on the SDLT return, the SDLT payable would have amounted to £124,000.

However, we referred the clients to Suzanne for advice and following a detailed review and by claiming specific reliefs, we were able to reduce the SDLT in this case to £42,000.

Moreover, as part of a detailed review of the circumstances (specifically as it involved transactions between husband and wife), we were able to offer an alternative solution to the splitting of the title that reduced the SDLT to £780.

By referring the client to Suzanne, not only were we able to save the client a considerable sum in stamp duty liability but our sister company, Starck Uberoi Wealth were able to help source a lender who were prepared to offer a mortgage on the specific terms required.


Multiple Dwellings Relief v Commercial rates case study

Case study on the rules in relation to multiple dwelling transactions and claiming Multiple Dwellings Relief (MDR).

A property developer client acquired a block of 15 flats for the total consideration of £1.7m. He used the HMRC SDLT calculator which gave a result of £168,750 and he has asked for confirmation of this figure and if any reliefs would be available to reduce the SDLT payable on the proposed transaction.


Purchasing from the same vendor as part of one deal means the transaction will be considered to be a ‘linked transaction’ and therefore the total consideration is aggregated.

The 3% surcharge will be applied as it is a multiple dwelling transaction and none of the flats fall within the definition of a subsidiary dwelling.

On first principles, if the Table A rates (residential) are applied along with the 3% surcharge, the SDLT payable would be £168,750; the figure provided by HMRC calculator.

However, the legislation specifically provides that where 6 or more dwellings are purchased, they will not be treated as residential property. Accordingly, the rates at Table B (non-residential) should be applied, resulting in the total tax payable of £74,500.

Moreover, a claim for Multiple Dwellings Relief (MDR) could be claimed as more than 2 properties are being purchased. If MDR is claimed, the above rule of using Table B is disapplied, so that Table A (using the 3% surcharge) is applied to the average price of each flat and this figure is then multiplied by the number of flats. A claim for MDR would result in SDLT payable of £51,000.

MDR is not automatic and must be claimed in the SDLT return. Amendments to the SDLT return can be made within 12 months of the filing date of the original return.


FAQs on flat conversions, stamp duty and Multiple Dwellings Relief

Our solicitors and mortgage advisors receive numerous enquiries in relation to converting property into flats together with land registry title split, more of which you can read about in our previous blog ‘The title split of your property and creating new leases‘. A common theme is a lack of understanding of the complex nature of SDLT and capital gains tax rules and benefits of claiming Multiple dwellings relief. Here, Suzanne provides answers to some Frequently Asked Questions our conveyancing solicitors encounter.


  1. I want to convert and sub-divide my property into 2 separate self-contained flats and re-mortgage both leases at the same time as I split the title. Is this possible and will SDLT be payable on the re-mortgage of each flat?    

Generally, a re-mortgage will not require SDLT to be payable because it is not a land transaction but the granting of new leases is a land transaction for SDLT purposes and SDLT may be payable. The amount of SDLT payable will be dependent on who the leases are granted to, i.e. an individual or a limited company, the value of the properties and the quantum of debt.

It is possible to split the title and re-mortgage at the same time rather than suffer the delay of having to wait for the land registry to register the separate leases and then being told by the new lender that the re-mortgages can only be completed 6 months after registration. I have found that Starck Uberoi Wealth have the experience in finding clients the right mortgage in these types of situations.


  1. I am buying a freehold property with my son with view to take on a future development project and convert the property into 4 flats. My solicitor has advised me that leases cannot be granted to oneself so after we complete the flat conversion, we should grant the leases into a limited company owned by us. What is the SDLT implication in doing so?

SDLT will be payable on the price paid for the property. On the basis that the property has yet to be converted into 4 flats, no claim for MDR could be made on the initial purchase.

If you subsequently convert the property to flats and grant the leases to a limited company, a further charge to SDLT will arise on the market value of the leases (regardless if no money is paid). However, Multiple Dwellings Relief would be available to reduce the SDLT payable. There may also be CGT implications associated with this option.

The SDLT exposure could be reduced by granting the leases in your sole names (e.g. 2 flats in father’s name and 2 in son’s name) or to other individuals.


  1. I own a freehold property with no mortgage worth £600k jointly with my wife and part of my retirement & inheritance planning is to split the title and grant 2 new leases into my wife’s sole name. Is SDLT and Capital Gains Tax payable?

Land transactions are exempt if there is no chargeable consideration. On the basis that your wife would not pay for the new leases, there would be no chargeable consideration and therefore no SDLT implications. This would not be the case if there was a mortgage on the property, as the assumption of debt by your wife would be treated as chargeable consideration for SDLT purposes (although the 3% surcharge does not apply in transactions between spouses/civil partners).

Transactions between husband and wife/civil partners are treated as occurring at Nil Gain/Nil Loss for capital gains tax purposes. Therefore, no CGT would be payable on this transaction.

Transactions between other connected persons are treated as occurring at market value and therefore CGT could be payable if there is a gain attaching to the property in transactions which are not between spouses/civil partners.


  1. I own a freehold property worth £850k with an outstanding mortgage of £500k. The property was subdivided into 3 flats more than 4 four years ago and I have now been granted a certificate of lawful development. I would like to split the title at the land registry by creating 3 new leases. My intention is to re-mortgage each flat to pay off the outstanding mortgage over the freehold title and raise an extra £100k to buy another house. Is SDLT payable?

SDLT is generally only payable where there is chargeable consideration. However, special rules apply in relation to the satisfaction, release or assumption of debt. Consideration of the treatment of the existing mortgage of £500,000 will be required.

Leases cannot be granted to oneself, therefore consideration of who the leaseholder should be will be required and the SDLT analysis will be different depending if it is an individual or limited company.

It is important to note that if the ‘purchaser’ is a company, the chargeable consideration will be deemed to be the market value, regardless that no money is exchanged or the value of the debt.

The 3% surcharge provisions are likely to be applied.

As the transactions will be linked and involve more the one dwelling, Multiple Dwellings Relief should be considered to reduce the SDLT exposure. Multiple Dwellings Relief is not automatic and must be claimed on the SDLT return.


  1. I have planning permission to convert my first-floor commercial office unit into 2 residential flats and the ground floor office into one flat under permitted development (PD) rights. Can I claim Multiple Dwellings Relief for the ground floor flat even though this flat will be fully converted a few months after the first-floor development has been completed?

SDLT can be payable on the grant, assignment, variation or surrender of a lease, where the total value of the transaction is above certain thresholds.

Multiple dwellings relief can be claimed where a transaction or a number of linked transactions include freehold or leasehold interests in 2 or more dwellings.

For the purposes of Multiple Dwellings Relief, a building will count 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.

The process of construction or adaptation must be physically underway for these purposes. HMRC do not consider obtaining planning permission on its own to be part of this process, if work on the property in line with the planning permission has not yet commenced at the effective date of transaction.

Relevant properties that are in the process of being constructed will be treated as dwellings at the point where building works on top of the foundations have begun.

In short, MDR can be claimed on the physical number of dwellings involved in the transaction, either completed or in the process of being constructed. This means, as long as the redevelopment works have commenced on the ground floor albeit not finished, you should still be entitled to multiple dwellings relief when the 3 leases are granted. We would strongly advise you keep any evidence of the commencement of such works.

The effect of MDR is to reduce the overall SDLT payable by revising the calculation so that the amount of chargeable consideration falling within the higher threshold bands is minimised. The minimum rate of tax under the relief is set at 1% of the amount paid for the dwellings.

Multiple Dwellings Relief is not automatic and must be claimed on the SDLT return.


  1. I am looking to buy a property at auction which is advertised as split into 3 self-contained flats under one freehold title for £500k. I will finance the purchase with a bridging loan and subsequently plan to exit the bridge by granting 3 new leases to either my limited company or my adult children and to re-mortgage each flat with a high street lender. Will I end up paying SDLT twice i.e. firstly on the purchase and secondly on the grant of the 3 leases?

SDLT of £30,000 will be payable on the purchase of the freehold. However, Multiple Dwellings Relief could be claimed to reduce the SDLT to £17,500.

If leases are subsequently granted, there could be further SDLT to be paid (in addition to the above). If they are granted to a limited company, SDLT will be payable on the market value of the leases. If granted to an individual, there will only be SDLT if there is chargeable consideration. The release of the mortgage will constitute chargeable consideration for these purposes.

Alternatively, if you can convince the seller to issue three long leases directly to you rather than sell as one freehold unit, SDLT would be payable on the aggregate value of the leases (as they would be treated as linked), but MDR would be available as above. The benefit to this approach is there will be no double charge.

In this case, as the majority of the value would be stripped from the freehold, the freehold title could be transferred to a limited company simultaneously with minimal SDLT implications.

Transactions between other connected persons are treated as occurring at market value and therefore CGT will be payable if there is a gain attaching to the property.



SDLT is becoming increasingly complex and getting the right advice before a transaction will result in significant SDLT savings. Consulting a tax specialist like Suzanne O’Hare in conjunction with our specialist conveyancing solicitors will ensure that your leases are drafted perfectly, the most tax efficient structure is put in place and that all available reliefs are claimed.


Suzanne is a senior tax consultant at Moore (NI) LLP, working solely in the tax advisory department.  Suzanne read Law and Accounting at Queen’s University, Belfast. She is also a Chartered Tax Adviser and holds the Advanced Diploma in International Taxation, being awarded the Worshipful Company of Tax Advisers Medal for the highest marks in the Principles of Corporate and International Taxation paper. She also lectures for the Irish Institute of Tax on the Principles of International Tax and more recently for the Institute of Professional Legal Studies at Queen’s University.

Suzanne can be contacted at
Whist every effort has been made to ensure accuracy regarding the content of this publication, Starck Uberoi Solicitors and Moore (NI) LLP cannot be held responsible in any way for consequences arising from the information given. No decisions should be taken on the basis of information included in the publication without reference to specialist advice.


How Starck Uberoi can Help

Starck Uberoi have a dedicated team of solicitors that specialise in creating new leases for flat conversions following a property title split. We offer an end-to-end service by also advising on stamp duty reductions and specialist mortgage advice where multiple leases are granted. You can contact us on 02088406640 or at We have offices in Ealing, BrentfordCanterbury and London Belgravia. For advice on getting the best mortgage deal for your new leases visit our mortgage page or email

Further reading

About Raminder Uberoi

Raminder is head of the property department and his practice includes acquisitions, sales, financing, planning, development, landlord and tenant matters and corporate-related property transactions. He specialises in all aspects of commercial and residential property continually developing successful and practical client-focussed strategies. He draws on his wide experience to achieve tailor-made solutions for his clients’ commercial and financial needs.