In James Winfield v HMRC [2024] TC9259, the First Tier Tribunal (FTT) rejected every argument advanced by HMRC when it tried to defend its decision to deny a claim for Stamp Duty Land Tax (SDLT) Multiple Dwellings Relief (MDR) in respect of a house with an annexe. The taxpayer, who cannot claim back costs against HMRC, had his appeal allowed.

Row of cottages

Mr Winfield purchased a residential property which could be divided into two dwellings.

  • One comprised four bedrooms, two bathrooms, toilets, a sitting room, a dining room, a kitchen/utility room, large hallway, and separate outside doors for access. It was divided from the other, by lockable fireproof/soundproofed doors.
  • The other smaller dwelling contained one large bedroom, a landing, a snug/office, a bathroom, a large living/dining area, a kitchen/utility room, a downstairs toilet and an office/storage room.
  • Both had separate outside entrances and separate electricity meters but had a shared boiler (which each side could control).
  • Having paid full Stamp Duty Land Tax (SDLT) at the time of the purchase, the taxpayer subsequently claimed Multiple Dwellings Relief (MDR) of £70,000.
  • HMRC denied the claim. The taxpayer appealed that decision.

Before the FTT HMRC acknowledged that each dwelling benefits from all of the facilities (kitchen, bathroom, living quarters etc.) required for occupation on a permanent basis. 

HMRC advanced a range of arguments (a) to (k) (as follows) which were all rejected by the FTT.

(a) The dwellings cannot be sold separately a point made in Dower.

The tribunal said: This is clearly incorrect. There is no legal impediment to such separate sales as there was in Dower. The dwellings could be sold separately and cross rights-of-way accommodated in the usual way.

(b) The property was marketed as a single dwelling.

The tribunal said: The fact that the property was marked as a single dwelling is something which we have considered but to which we attach little weight. Estate agents will do anything to get a deal and market to that effect.

(c) The 2007 planning application was not either made or granted on the basis that it would enable dwelling one to be used as an additional dwelling.

The tribunal said: The 2007 application does not specifically say that dwelling one should be occupied as a separate dwelling and does not shed any light on whether the property is actually suitable for use as a single dwelling.

(d) The 2022 planning application was rejected on the grounds which suggest that the property was a single dwelling.

The tribunal said: Nor do we think that the planning consents and applications militate against the dwellings being treated as suitable for use as single dwellings. In our view, the suggestion that the 2022 planning application and rejection militate towards this is misconceived.

(e) Whilst there is separate access to the dwellings, dwelling two has a much grander door for access than dwelling one and it seems unsatisfactory for the main dwelling to lose its main entrance.

The tribunal said: We do not consider that this carries much weight either. The statutory question is whether the dwellings are suitable for use as single dwellings. And it is clear that both have wholly satisfactory and independent, access. This is consistent with the requirement for privacy, self-sufficiency and security

(f) There is insufficient internal separation between the dwellings. The internal doors do not provide the necessary degree of soundproofing and fireproofing.

The tribunal said: The internal doors do provide an effective barrier between the two dwellings. They are substantial, lockable, and on the evidence, soundproof and fireproof. They provide wholly effective security and privacy.

(g) An occupier of the dwellings would expect a greater degree of privacy than that which currently subsists. The occupiers of each dwelling can see into the rooms of the other dwelling. Whilst this might be acceptable in an urban environment, the objective occupier would not accept this in a rural context.

The tribunal said: We take judicial notice of the fact that in many small rural developments involving barn conversions, separate dwellings are built, cheek by jowl with plate-glass windows, around a single courtyard, where occupants of one dwelling can readily see into the rooms of another. Yet these dwellings fly off the shelves. Any perceived lack of privacy in this rural context does not seem to affect the willingness of purchasers to acquire such properties. And in that context, as in this appeal, privacy can be readily secured by the use of curtains and blinds.

(h) There is a single boiler providing domestic hot water and central heating to both dwellings.

(i) There is a single electricity supply (albeit two fuse boxes) to both dwellings.

(j) The fact that the controls for these single supplies are located in dwelling one has an impact on privacy and self-sufficiency.

The tribunal said: Whilst it is true that there is a single boiler serving both properties and two fuse boxes, and it is not possible to identify the units of oil or electricity consumed by each dwelling, an apportionment of that use would be dealt with via a tenancy agreement (as is commonplace in these sort of situations).

(k) The property has a single council tax account and postal address.

The tribunal said: Whilst the fact that the dwellings do not have separate council tax accounts or postal addresses is something we take into account and have considered, we do not consider that the weight which attaches to these is anywhere near sufficient to outweigh the facts of the physical attributes and facilities of the dwellings.

The FTT concluded that the statutory test required it to consider whether each dwelling is used or is suitable for use as a single dwelling. Fiander tells us that this must be assessed by reference to suitability for occupants generally and that the test is objective. It is a multifactorial assessment which requires us to take into account all the facts and circumstances. What matters is that the occupant’s basic living needs must be capable of being satisfied with a degree of privacy, self-sufficiency and security consistent with the concept of a single dwelling.

The taxpayer's appeal was allowed.

Editor's note 

SDLT MDR was withdrawn for property purchases made on or after 1 June 2024. There are still a number of ongoing appeals on this topic. Let us all hope that the HMRC don't waste any more taxpayer's money in making pointless and fruitless challenges as was evidenced in this case. We have a handy tool which takes you through the steps of the multifactoral test for MDR as suggested by the tribunals.

 Useful guides on this topic

SDLT: MDR & Annexes Tool
Stamp Duty Land Tax (SDLT) Tool, if you bought two or more properties in a single transaction use this tool to see if you met 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 and Annexes
What is Multiple Dwellings Relief (MDR)? When did it apply and how is it claimed?

SDLT: Residential property & dwellings
What is residential property for Stamp Duty Land Tax (SDLT)? What tax rate applies?

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)?

External links

James Winfield v HMRC [2024] TC9259

 

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