Although Multiple Dwellings Relief (MDR) from Stamp Duty Land Tax (SDLT) was abolished with effect from 1 June 2024, cases dealing with its availability are still working their way through the courts. Recently, two purchasers of a house with an attached annex succeeded in arguing before the First-tier Tribunal (FTT) that both were suitable for use as separate dwellings and MDR was therefore available.
The purchasers had bought the property for £492,000 and paid SDLT of £14,600. They subsequently amended the original SDLT return, reclaiming SDLT of £9,680 on the basis that MDR applied. HMRC opened an enquiry into the return and rejected the MDR claim. After an internal review upheld HMRC’s decision, the purchasers appealed to the FTT.
There was a hallway at the rear of the property, situated between the kitchen of the house and the utility room of the annex, with a door from each of those rooms and a door out to the rear garden. The door from the utility room was only lockable from inside the annex, whereas the door from the kitchen was lockable from both sides. HMRC argued that the layout and nature of the doors to the hallway meant that the house and the annex lacked the necessary privacy and security to be separate dwellings. HMRC also contended that the annex lacked sufficient facilities for the preparation of food and that its occupants would have no control over the supply of mains water nor access to the boiler. The house and the annex were not listed separately for Council Tax purposes and did not have separate postal addresses or utility meters, which HMRC said pointed to them not being separate dwellings.
The FTT considered that the annex had sufficient facilities for the preparation of food. There was a high-voltage wall connection for a cooker and any occupant could install one without carrying out physical alterations to the property. The fact that the annex relied on the house for hot water was not material as access could be covered in the terms of a tenancy agreement. The same applied to the lack of utility meters. There were several features of the annex that pointed to it being a separate dwelling, including a room suitable for use as a bedroom and living room, a separate shower and toilet, a separate lockable front door and independent electrical heating.
The FTT found the use and sharing of the hallway to be the most difficult aspect of the appeal. The most practical option would be to provide that the hallway was communal and that the house had exclusive use of the garden, although this would necessitate locking the back door to prevent access to the garden. Allowing the appeal, the FTT concluded that the house and the annex were suitable for use as single dwellings on the basis of the hallway being communal.