Was multiple dwellings relief due?

A quick look at MDR

Multiple dwellings relief (MDR) can reduce stamp duty land tax (SDLT) and its equivalent in Scotland and Wales. It applies if a buyer purchases two or more dwellings in one or a series of related transactions. Usually, it’s claimed on the SDLT etc. return completed by the solicitor or conveyancing agent, but in this case it was not. The purchasers, A and T Doe (Ds) amended their return to include a claim for MDR. HMRC opened an enquiry into the amended return and refused the claim. The Ds appealed to the First-tier tribunal (FTT).

The “dwellings”

The Ds bought a house which included a separate first floor annexe made up of a bedroom, bathroom and kitchen. It had its own boiler, electricity and doorbell. Seemingly it was separate from the main part of the property but shared a front door, hallway and stairs. Access to the annexe was from the communal hallway through a lockable door.

Questions for the FTT

The Ds’ appeal involved two elements: whether HMRC raised the enquiry within the time allowed, and the entitlement to MDR. The FTT had no trouble in deciding that HMRC was in time with its enquiry. It started within the nine months from when it received the amended SDLT return. The main appeal was whether the annexe constituted a dwelling in its own right which would have justified the Ds’ claim for MDR.

State of the property

Entitlement to MDR depends on the “physical attributes of the property at the relevant time”. The relevant time being when contracts for the sale/purchase were completed. MDR cannot take account of changes to a property made after completion of the purchase even if they were always intended.

Self-contained or not

There was no doubt that the annexe was self-contained accommodation. However, there was an issue regarding access to the main accommodation which could be reached from the common hallway. The Ds argued the access was similar to that in a mansion block where separate apartments are separate dwellings for MDR purposes. However, the FTT noted an important difference. In the Ds’ property occupants of the main house need to lock the rooms on the ground floor to prevent access to the occupants of the annexe via the common hallway. While this could be easily remedied by the addition of an intermediate locking door this didn’t exist when the sale was completed. The FTT decided that the main house and annexe were therefore suitable for use as a single dwelling, not as two. Therefore, MDR did not apply.

Notwithstanding the outcome, an important point to take from this case is that entitlement to MDR is easily missed by solicitors etc. when preparing the SDLT return. They may not have a full understanding of what a property consists of unless they’ve studied the plans or visited it. When purchasing a property where MDR might be relevant but not obvious, make their solicitor etc. aware.