In David Merchant and Sarah Gater v HMRC [2020] TC07783, the First Tier Tribunal (FTT) dismissed the appeal made by the taxpayers. It was found that the closure notice issued by HMRC was valid and that the annexe was not a separate dwelling for Stamp Duty Land Tax (SDLT) Multiple Dwellings Relief (MDR).

Due to the COVID-19 pandemic, the appeal was determined without a hearing, which was agreed by both parties.

  • The taxpayers jointly purchased a property in March 2016 for £1.92 million.
  • The SDLT transaction return and payment of SDLT were on the basis that the purchase was for a single residential property and no reliefs had been claimed.
  • The property comprised of the main house and an annexe, which can be accessed via a common entrance and hallway.
  • Relatus, on behalf of the taxpayer, wrote to HMRC in April 2017 to amend the land transaction return and request a repayment of overpaid tax. A claim under Multiple Dwellings Relief (MDR) was made on the basis that there were two Dwellings.
  • Further supporting information was provided in May 2017 by Relatus for the amended return.
  • The annexe consisted of a kitchen, shower room, living room and bathroom. The annexe did not have its own have a separate council tax billing, postal address or separate gas and electricity meter.
  • The annexe was not registered separately from the main house with the land registry.
  • The letter submitted by Relatus highlighted that the annexe had no independent external access, however, it still considered the relief was available as the annexe could be accessed via a common entrance and hallway.
  • HMRC raised an enquiry into the Amendment of the return in January 2018.
  • HMRC in March 2018 indicated that had the annexe been registered with land registry It would have served as an indicator that there is a separate dwelling.
  • On June 2018 HMRC closed the enquiry on the grounds that no relief could be claimed, based on the evidence provided it did not demonstrate that the annexe could be a separate dwelling from the main house.
  • Following a review, the taxpayer made an appeal to Tribunal in February 2019.

The FTT had to establish:

  • If the amended return was not submitted on time, should HMRC have accepted the notice of the amendment and amended the return?
  • Was the HMRC enquiry into the amended return valid and was the issued closure notice valid as a conclusion had not been provided by the officer?
  • If HMRC had accepted the amended return and both the enquiry and closure notices were valid.
  • If the closure notice was valid, the next step would be to establish whether the taxpayers were entitled to claim MDR.

The FTT found:

  • That the documents to satisfy the statutory requirements to amend the return was provided in May 2017. Therefore, the amended land transaction return was submitted more than 12 months after the filing date.
  • By HMRC raising an enquiry into the amended return in January 2018, it demonstrates that the amendment had been accepted, albeit late.
  • The enquiry by HMRC was raised in time, based on the amendment being made in May 2017.
  • Whilst the closure notice did not offer a conclusion, based on previous correspondence between the parties, it was ‘substantially in conformity’ with the legislation and therefore valid.
  • The FTT found that the annexe did not form a separate dwelling to the main house and therefore MDR was not available.


How to appeal a penalty for late filing of a tax return or late payment of tax. This section covers appeals in relation to tax returns and payments for income tax Self Assessment, Corporation Tax, PAYE, Non-residents CGT, VAT, ATED, SDLT and IHT.

SDLT: Annexes and multiple dwellings relief
What is multiple dwellings relief? When does it apply and how is it claimed?

Did you pay too much SDLT on your annexe?
The purchasers of properties with self-contained annexes before 1 April 2016 might have unknowingly overpaid Stamp Duty Land Tax (SDLT).

SDLT: Residential Property & Dwellings?
What is a residential property for SDLT? What rate of SDLT applies to residential property? What is a dwelling? 

Annexe not a separate dwelling for SDLT
In Keith Fiander and Samantha Brower V HMRC [2020] TC7676, the First Tier Tribunal (FTT) decided that an annexe was not a separate dwelling for Stamp Duty Land Tax (SDLT) Multiple Dwellings Relief (MDR).

External links

David Merchant and Sarah Gater V HMRC [2020] TC07783