Under the old Stamp Duty Land Tax ("SDLT") regime, MDR often operated to limit the SDLT payable on the portion of the price allocated to residential parts of the asset to 1%. Essentially this functioned by treating the acquisition of multiple 'flats' as individual residential purchases, subject to a minimum tax payable of 1% of the overall price.
Under the new Land and Buildings Transaction Tax ("LBTT") regime in Scotland, MDR is preserved. It is, however, maintained in a slightly different format with the calculation often resulting in more tax being payable than would have been the case under the old SDLT regime. For instance, the tax floor is now set at 25% of the tax which would otherwise have be payable if MDR had not applied.
One point of interest which arises out of the new LBTT legislation relates to the treatment of long leases. There is some ambiguity in the legislation as to whether an exclusion from MDR intended to catch rent under new leases also captures consideration paid for the assignation of long lease interests. Should this prove to be the case, the result would be that the position in England would differ materially from that in Scotland in relation to this type of transaction. Purchasers would require to pay LBTT at the applicable commercial rate on the whole price.
Any purchaser proposing to take advantage of MDR on the acquisition of a long lease interest would be well advised to seek specialist tax advice before finalising any bid or submitting an LBTT return.