Although Multiple Dwellings Relief (MDR) from Stamp Duty Land Tax (SDLT) was abolished earlier this year, it can be still claimed in respect of property transactions that completed before 1 June 2024, so cases dealing with its availability can be expected to arise for some time yet. Recently, two purchasers of a property successfully argued before the First-tier Tribunal (FTT) that MDR was available on it.

The property had been purchased in September 2021 and consisted of a main, five-bedroom house and a separate annex. The purchasers claimed MDR on the basis that the annex qualified as a dwelling under Paragraph 7(2) of Schedule 6B of the Finance Act 2003. HM Revenue and Customs (HMRC), however, took the view that the house and the annex constituted a single dwelling, and issued closure notices disallowing the MDR claim and increasing the SDLT due by £13,000. After HMRC rejected their appeal against that decision and an independent review upheld HMRC's view, the purchasers appealed to the FTT.

The annex was about 20 metres away from the house and had its own bedroom, living area, kitchen, shower and toilet. There was a washing machine and a dishwasher. The annex did not have its own land registry title and could not be sold separately from the house, but was separately rated for Council Tax.

The purchasers submitted that the annex would meet an occupant's basic living needs and afford a degree of privacy. HMRC contended that there was a lack of security and privacy for the occupants of both the house and the annex, pointing out that the annex could be seen from the windows at the back of the house and that an entrance at the side of the house was accessible to occupiers of both it and the annex.

In the FTT's view, the annex was capable of meeting an occupant's basic domestic needs. Noting that its distance from the house was similar to the distance between houses opposite each other on many roads, the FTT found that the annex offered a sufficient degree of privacy and security. The FTT disagreed with HMRC's contention that it was not suitable for a tenant, observing that it had been occupied by a rent-paying tenant before the purchase.

Having conducted the multi-factorial assessment required, the FTT concluded that the annex was a dwelling. The purchasers' appeal was allowed.