The Court dismissed the appellant’s claim for multiple dwellings relief (MDR) leaving the home owner with a £141,750 bill for stamp duty land tax (SDLT)
The First Tier Tribunal (FTT) dismissed an appeal from John Mason who claimed that the property he had purchased was eligible for multiple dwellings relief, but the tribunal found that the detached annexe in the grounds of the property he had purchased was not suitable for use as a single dwelling and therefore would not qualify.
Mason and his wife purchased a property for £1.9m with the finalised date, the effective date of the transaction, of the sale in February 2019. The couple completed the stamp duty land tax return in March 2019.
The self assessment claimed that the tax due on the property was £77,500 on the basis that the purchase was a transaction of ‘at least two dwellings’ due to an annexe in the garden. As part of schedule 6 Finance Act 2003, this would qualify the purchase for multiple dwellings relief (MDR).
HMRC concluded that the property as a whole was a single dwelling and that the purchase did not qualify for multiple dwellings relief. HMRC issued a closure notice to Mason in December 2019, amending the SDLT return and assessing an additional tax of £64,250 on top of the £77,500, which accumulated to £141,750 owed overall in SDLT.
In January 2020, Mason wrote to HMRC stating that the property contained two dwellings; the main house and an annexe. He attached a floor plan, copies of the contract of sale, completion statement and TR1 form, and photos.
HMRC responded that the property did not qualify for multiple dwellings relief after its further check. Mason then appealed the closure notice in August 2020.
Mason argued that the property consisted of two separate dwellings, the main house and the annexe that was suitable for use as a single dwelling at the date of the transaction. Mason referred to HMRC’s guidance, SDLTM00410, which stated that ‘evidence will be needed to show that each dwelling in question is sufficiently independent to count as a separate dwelling in its own right’.
Mason argued that the annexe was a separate, stand-alone structure with ample floor space and multiple lockable entrances. It could not be seen from the main house and access to it was via the terrace at the back of the main house and by a side-gate and gap on opposite sides of a garage in the grounds. It had its own plumbing, sleeping facilities, a shower, washbasin, and toilet. Mason also argued that there was ample space for the preparation and consumption of food.
HMRC argued that the property could not be classed as two separate dwellings due to the fact that there were no kitchen facilities in the annexe at the date of transaction. HRMC stated that there was no kitchen sink and, although there were enough power points, there was no oven or hob and no refrigerator, freezer, or cupboard to serve as a pantry or larder. Therefore, the annexe was not suitable for independent day-to-day living.
HMRC also said that to have access to the dwelling the occupant would need to cross the terrace area and garden at the back of the main house. HMRC also stated that there was no separate council tax at the annexe nor was there was a separate postal address.
The tribunal found that there were two significant features that prevented the annexe from being suitable for use as a single dwelling.
Firstly, the tribunal found that there was ‘a complete absence of anything that would usually be associated with a kitchen’. Although cupboards and ‘white goods’ could be easily added, this was not sufficient to render the annexe suitable for use as a dwelling separate from the main house.
Secondly, an occupant of the annexe, or a visitor, could only gain access from the main road via the shared driveway and then from either the gap or gate on either side of the garage, alongside the main house, and across the garden.
While this means of access might have been acceptable to occupiers who knew each other it was not consistent with the suitability of the annexe for use by a person who was not known to the occupants in the main house. Based on these issues, the appeal was dismissed.
Mason was allowed to appeal the decision within 56 days of the decision being sent to him but no appeal has been announced.
