The First-tier Tribunal has held that the acquisition of a property that included an annex connected to the “main” house by a corridor that lacked an internal door did not qualify for multiple dwellings relief from SDLT.
The First-tier Tribunal has determined that multiple dwellings relief (MDR) from SDLT was unavailable on the acquisition of a residential property that included an annex freely accessible from the “main” house; as the annex was not a separate dwelling.
MDR may be available if a residential property acquisition involves more than one property (or part) “suitable for use as a single dwelling” (suitability test)
The taxpayers claimed MDR, arguing that the annex, comprising sufficient living facilities for residence and having its own lockable external door, satisfied the suitability test. The annex connected to the main house by a corridor, but there was no door separating the two areas, just door jambs.
Finding for HMRC, the tribunal held that:
Some degree of privacy and security was required to pass the suitability test for SDLT. In a previous tax case the court reported that, for council tax purposes, a lockable door was unnecessary for part of a property to constitute separate living accommodation. However, that test differed from the suitability test, which was an objective test of general suitability for use as a dwelling.
Use as a “single” dwelling implied that each property was stand-alone. Here, the main house and the annex were physically very close (and indeed were marketed as one property) and were not, therefore, stand-alone.
That a door could be added did not make the annex suitable for use as a single dwelling. Suitability was based on the existing features of the property at the time of acquisition.
The tribunal also considered that little weight should be placed on the lack of separate metering, postal addresses or council tax registrations (although these supported its conclusion).
This decision highlights that the availability of MDR for acquisitions of houses with annexes is fact-dependent, but that physical separation, independence and privacy, without regard to particular relationships between occupants or hypothetical structural additions, is required.
Article by Simon Howley ATT CTA ATA AFA MIPA