TQOTW: SDLT and Multiple Dwellings Relief
My client is considering replacing his main residence. The prospective property is being marketed as the freehold of a main house with an annexe. The annexe is connected to the main house by a door to the kitchen which is locked but has its own separate external entry too. The annexe is self-contained, and the vendors have previously rented the annexe out to tenants. My client has heard that they could be entitled to claim Stamp Duty Land Tax Multiple Dwellings relief (MDR) on their SDLT1 Tax Return for the main house and the annexe. Is this correct?

FA 2011 introduced MDR and the relief can reduce the amount of SDLT payable when two or more dwellings are purchased.

To determine whether the SDLT MDR relief will apply to this particular transaction, the conditions set out in S58D and para 2(1) to 2(4) Sch. 6B FA 2003 will need to be considered. In particular, the rules for determining what counts as a dwelling the purposes of Sch.6B are set out in paragraph 7, the relevant part of which provides as follows:
‘(2) A building or part of a building counts as a dwelling if –
(a) it is used or suitable for use as a single dwelling …’

Schedule 6B does not define the word “dwelling” and therefore it takes its ordinary meaning. The test is an objective one and although not binding, HMRC submitted that their manuals at SDLTM00410-415 and SDLT00425 aid in determining what constitutes a single dwelling:

‘The test of whether a property is “suitable for use” as a single dwelling is a more stringent test than whether it forms a self-contained part of a larger dwelling. Furthermore, whether or not it is suitable for use as a single dwelling requires consideration of whether it is sufficiently independent to be considered a dwelling on its own. In the case where a building is considered to contain more than one dwelling, evidence will be needed to show that each ‘dwellingʼ in question is sufficiently independent to count as a separate dwelling in its own right. In the absence of sufficient evidence, it may be decided that it is more appropriate to consider that there is one dwelling, not two or more.
“In considering whether or not a property includes one or more dwellings (and if so, how many) a wide range of factors come into consideration. No single factor is likely to be determinative by itself. However, not all factors are of equal weight either, and one strong factor can outweigh several weaker contrary indicators. Where a number of contrasting indicators exist, it may be necessary to weigh up the factors to come to a balanced judgement.”

It is important to note that HMRC have been relatively successful in recent cases heard at the Tax Tribunals.

Various MDR claims have been overturned by the Tribunals from taxpayers who have failed to discharge their burden of proof of demonstrating that an annexe purchased alongside a main residence is a separate self-contained dwelling (See: Fiander [2021] UKUT/TCC/2021/156; Partridge [2021] TC 07991; and Merchant [2020] TC 07783.). In Mullane & Anor [2021] TC8100, the MDR claimed was overturned too because the First Tier Tribunal found that the main house and an annexe were joined by a conservatory, and this did not constitute an interest in two dwellings.

In a different set of circumstances, Doe & Anor V R&C Commrs [2022] BTC501 failed because there was no independent access to a self-contained flat which was on the first floor of house, and which was accessed through the main residence.

I would advise your client to be very careful before considering submitting a SDLT1 form to HMRC to claim Multiple Dwellings Relief. Each claim is unique and after you have considered all the facts involved, the relevant law, all retained case law, and you reasonably believe that MDR is due and can substantiate this, only then should a claim be submitted to HMRC.

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Patrick started his tax career in practice, and has also worked in industry in various operational and tax roles. He has experience of dealing with SDLT, Employment Taxes and HMRC enquiries. He is a member of the Chartered Institute of Taxation.

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