An unusual claim for Stamp Duty Land Tax (SDLT) Multiple Dwelling Relief focused on a curious aspect of the rules: could a garage in the process of being constructed or adapted at completion qualify as a separate dwelling?

House with garage

In Yisroel Dreyfus v HMRC [2024] TC09113, the purchaser of a residential property arranged to create an annexe to the property in advance of completion. This then facilitated a claim under the Stamp Duty Land Tax (SDLT) rules for Multiple Dwellings Relief (MDR).

  • On 7 June 2021, the Appellant entered into a contract for the purchase of 60a Cranbourne Gardens, London, ('the Property').
  • On the same date, the Appellant agreed to a ‘key undertaking’ document, the stated purpose being to allow the Appellant to carry out building works to construct a self-contained unit at the property out of its garage.
  • On acquisition of the property it was claimed that as the property was being converted into two Dwellings for SDLT purposes on completion, the proposed new annexe was in the process of being constructed and thus was a second dwelling facilitating a claim for MDR.

HMRC rejected the claim, after issuing a closure notice and concluded that the Appellant was not entitled to claim MDR. It amended the amount due to £114,750.00, increasing the tax bill by £74,750.00.

The Appellant's representative appealed the decision.

The relevant SDLT legislation provides that: 

  "A building or part of a building counts as a dwelling if—

            (a)     it is used or suitable for use as a single dwelling, or

            (b)     it is in the process of being constructed or adapted for such use.”

The key question for the FTT was whether part of the building purchased ‘is in the process of being constructed or adapted for such use’ [as a dwelling].

It reviewed the evidence:

  • The part of the property that was said to be being converted into an annexe was at that time a former garage to the residential property.
  • Unfortunately, the appellant was ill and unable to attend the hearing. His representative lacked detailed knowledge of the conversion.

HMRC placed a lot of emphasis on the fact that the part of the building under conversion had not been finished some two years down the line. HMRC argued that:

  • The converted garage could never qualify as a dwelling.
  • Planning permission should have been obtained for any conversion.

The FTT then considered whether it would be possible for the proposed annexe (under construction) could qualify as a separate dwelling when completed.

  • It reviewed what was known of the annexe to see if it would qualify as a dwelling.
  • It considered whether plumbing and sewerage were complete: they were not.
  • It noted that water, light and heat were all still shared with the main property and not separately metered.
  • There was a lack of evidence on whether a lockable door between the house and the annexe was lockable on both sides.
  • It noted that no council tax was being paid in respect of the annexe and two years on the annexe was finished and still not let out separately.
  • It looked at the works planned and undertaken before purchase and decided that these did not provide sufficient evidence of construction or adaptation.

The Tribunal concluded that 'the annexe' was not usable as a single dwelling.

The appeal was dismissed.


MDR is being withdrawn from 1 June 2024 but it would be quite interesting to see an appeal by the taxpayer in this case (although we think it is unlikely) as there are several unanswered questions about the decision. For example:

  • There is no two-year time limit in the legislation that sets how long ‘the process of being constructed or adapted for such use’ can subsist. 
  • HMRC was concerned about planning but given that the garage was already part of a domestic property is that a valid 'concern'? Surely, it's pure speculation that a local authority would deny the creation of an annexe in a time of housing shortage.
  • Having shared services with the main house also seems to have been a factor in the FTT’s decision, again it's hard to see how this can be a factor when many flats etc share services.
  • Then there was also the question of what evidence would be needed to show something is ‘in the process’ of being constructed or adapted. Any process starts and ends and the legislation simply does not provide any more assistance on that front. The decision notes that in a 'key undertaking' document the stated purpose being to allow the Appellant to carry out building works to construct a self-contained unit at the property was made two weeks before purchase, and there were emails between buyer and seller on this topic and a workman engaged. Surely this was the commencement of the process?
  • Unfortunately, it is unclear what happened in terms of the FTT’s analysis but we think that the tribunal was not assisted by the absence of the appellant to give evidence and that is reflected in the decision.
  • This is an area of MDR that we would all like to see appealed because it's so technically interesting. Alas for MDR! It was announced at the Spring Budget that this will be withdrawn on 1st June this year

Useful guides on this topic

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

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: Residential property & dwellings
What is a residential property for Stamp Duty Land Tax (SDLT)? What tax rate applies?  What gardens and grounds are subject to higher rates of SDLT?

SDLT: At a glance, Stamp Duty Land Tax, rates & allowances
What is Stamp Duty Land Tax (SDLT)? What are the rates of Stamp Duty Land Tax (SDLT)?

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

External links

Yisroel Dreyfus v HMRC [2024] TC09113