Basement annexe not a separate dwelling for MDR

In James and Barbara Mobey v HMRC [2021] TC08103, the First Tier Tribunal (FTT) denied Stamp Duty Land Tax (SDLT) Multiple Dwellings Relief (MDR) on the purchase of a substantial property with a basement annexe. The annexe did not offer the required facilities to be a dwelling in its own right and compromised the privacy of the main house.

• Mr & Mrs Mobey purchased a property for £2.9m.
• They filed a Stamp Duty Land Tax (SDLT) return self-assessing £265,950.
• They then filed an amended return claiming Multiple Dwelling Relief (MDR) contending the lower ground floor, of the three-level property, was a separate dwelling.
• HMRC opened an enquiry.
• HMRC issued a Closure notice which was upheld following a Statutory review.
• Mr & Mrs Mobey Appealedto the FTT.

The FTT dismissed the appeal finding that:

• The point to consider was whether the annexe and main house were suitable for use as separate dwellings.
• The term ‘dwelling’ is a multi-factorial test based on the facts at the time of completion.
• Actual use post-completion is not relevant.
• A dwelling is a person's home and should include a place to sleep, living accommodation, bathing and cooking facilities. These facilities should be provided with a sufficient degree of privacy and security.
• Factors pointing to the annexe being a separate dwelling were as follows:
  • The rooms in the annexe were of a good size.
  • The annexe included two bedrooms, a living room and two bathrooms.
  • The annexe had independent external access.
  • The occupants of the annexe can deny access to the occupants of the main house.
  • The annexe has its own utilities.
  • The main house is very large and includes all the basic facilities required for a dwelling and much more.
• Factors indicating the property was a single dwelling:
  • The annexe had no kitchen nor facilities for the storage or preparation of food.
  • The occupants of the main house could not deny entry to the occupants of the annexe which compromised the security and privacy of the main house.
  • The occupants of the annexe could enter the garage of the main house.
  • The occupants of the annexe could not be prevented from using the grounds of the main house.
  • The annexe did not have a separate Council Tax liability.
  • The annexe did not have a separate postal address.
  • The estate agent’s particulars presented the property as a single property.
  • The owner would likely be unable to sell either the main house or the annexe to separate unconnected purchasers.
• The most important factors were the compromised privacy and security of the main house and the lack of food preparation facilities for the annexe.
• On the balance of the evidence, the annexe was not a separate dwelling and the MDR claim was not available.

Useful guides on this topic

SDLT: MDR & Annexes Tool
Stamp Duty Land Tax (SDLT) Tool, if you are buying two or more properties in a single transaction use this tool to see if you meet the qualifying conditions and you may be able to claim both Multiple Dwellings Relief and relief from the Higher Rate Charge.

SDLT: Multiple Dwelling Relief 
What is Multiple Dwellings Relief (MDR) for Stamp Duty Land Tax purposes? When does it apply and how is it claimed?

Closure notices
When does HMRC issue a Closure Notice? Can a taxpayer demand one? Are there appeal rights? 

Statutory Review (by HMRC)
What is a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review? 

How to appeal an HMRC decision
Disagree with a HMRC decision? How to appeal, what type of decision can you appeal, what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

External links

James and Barbara Mobey v HMRC [2021] TC08103