A recent Tribunal hearing found that a purchase of a residential property with separate annex did not comprise two dwellings such that a claim to Stamp Duty Land Tax (SDLT) Multiple Dwellings Relief (MDR) applied. Mr and Mrs Mason purchased the property in February 2019 claiming relief for MDR. HMRC opened an enquiry into the SDLT return. Mr Mason sent copies of a floor plan and photographs in response to the enquiry stating the property consisted of a main house and annex. HMRC disagreed with the contention and issued an assessment for a further £64,250 SDLT and the matter proceeded to First Tier Tribunal.

HMRC guidance

Using HMRC guidance, SDLTM00410, which states that each "dwelling" must be sufficiently independent to count as a separate dwelling in its own right, and no single factor is likely to be determinative of itself, Mr Mason provided evidence that the annex was suitable for independent living, by being not connected to the main house as a standalone separately alarmed structure.  Crucially however, the annex did not have "an area where a meal can be prepared and somewhere suitable to eat it". The infrastructure for a kitchen e.g. plumbing for a sink, was missing and at the effective date the annex was not being used as a separate dwelling. Additionally whilst it was a separate building the access was not sufficiently separate from the main house.

What were the deciding factors?

There were main two factors which swung matters for HMRC. Firstly,  at the effective date of transfer (completion of purchase), whilst sufficient space for a kitchen existed there were no cupboards or white goods in the annex or a kitchen sink. Secondly, whilst the annex was a standalone building separated by a hedge, access was gained via the driveway and across the garden of the main house.

As has always been the case for SDLT it is the use of the property at the effective date of transfer that proves determinative. The annex was neither being used or suitable for use as a single dwelling at that time and future use has no bearing on matters. 

An increasing number of cases involving MDR have now come before the Tribunal and HMRC has been successful in the majority. It is therefore crucial that a careful review of the property use and facilities is undertaken before making a claim for MDR.