Stamp Duty Land Tax – planning restriction contributes to rejected application of multiple dwellings relief

22 September 2022

In the recent decision of Dower v HMRC [2022], the first-tier tribunal ruled that HMRC were correct to deny the taxpayer multiple dwellings relief in respect of a purchase of a property with an adjoining annexe.

The decision followed the recent cases of Fiander v HMRC [2021] and Mobey and another v HMRC [2021] which provided further clarification on HMRC's interpretation of the relief.

In the judgment, the tribunal ruled that the lack of kitchen facilities in the annex (the kitchen consisted only of a microwave and slow cooker), indicated that the property was not "suitable for use as single dwelling".  The tribunal also considered other factors (such as the shared postal address, utility accounts, council tax account, use of the property as Airbnb accommodation and the physical attributes of the property) before coming to their decision.

Perhaps most significantly, the tribunal emphasised the presence of a planning restriction with prevented the sale of the annex separate to a sale of the main property.   The tribunal ruled that because the annexe could not have been sold separately as a residential dwelling on the date of completion, it could not have been said to be a residential dwelling in its own right. HMRC list the planning status of a property in their guidance notes as a factor to consider whether MDR should apply, but this case was unusual as the tribunal gave particular weight to the planning restriction in reaching their judgement.

Multiple dwellings relief is a complex relief and a number of factors should be considered before deciding whether or not it should apply to a particular case.  Advice should be taken at an early stage if you believe this to be relevant to your purchase.

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