Is my Annex a Self-Contained Dwelling?

Author

Rohan Manro

A tax adviser, Rohan successfully completed and passed his final CTA examinations (Advisory & Application and Interaction for owner-managed businesses).

Annexes, Self Contained Dwellings & MDR

Multiple Dwellings Relief (“MDR”) offers relief for residential property transactions where the transaction consists of two or more self-contained dwellings – typical cases will involve a residential property which has a connected or unconnected annex.

What is a Self-Contained Dwelling?

For a self-contained annex to qualify as a dwelling, it will need to be:

  1. Used as a dwelling;
  2. Suitable for use as a dwelling; or
  3. In the process of being constructed or adapted for such use

If the self-contained annex is actually being occupied as a self-contained dwelling then it will almost certainly qualify for relief.

If the self-contained annex is not being occupied, then you will need to demonstrate that it is suitable for use as a dwelling.

What are the key factors?

In order for a self-contained annex to qualify as a dwelling, it will need to have the facilities to provide the basic living necessities such as facilities for personal hygiene, consumption of food and drink, storage of personal belongings and a place to sleep.

As such, the prima facie indicators that a self-contained annex will qualify as a dwelling as such include:

  • A bedroom – a place for the residents to rest, sleep and store personal belongings
  • A kitchen – a place for the residents to store, prepare and consume food and drink
  • A bathroom – a place for the residents to maintain their personal hygiene
  • Privacy and Security – the self-contained annex would ideally be accessible separately from the main property and / or with any connecting doors being lockable from the inside

Whilst, these might be the minimum criteria required, it is not always conclusive. For instance, a number of self-contained dwellings may share a kitchen.

What else do I need to think about?

Recent case law has illustrated that one must take a realistic approach when determining whether a self-contained annex may qualify for relief. With this in mind, other factors which may prove useful / detrimental in a claim for MDR may include:

  • A separate utilities supply would evidence that the self-contained annex could be occupied without reliance on the utilities supply of the main house
  • A separate postal address would further evidence the suitability of the self-contained annex to be used as a dwelling with personal and private mail being deliverable to the annex directly
  • A separate council tax license would evidence a clear degree of separation between the main house and the self-contained annex
  • If it is possible for the annex could be sold in isolation then this may evidence that it is suitable for use as a self-contained living area
  • Historic occupation of the self-contained annex may evidence its suitability for use as a self-contained annex

Do I Have a Self-Contained Dwelling?

Due to the way the legislation is drafted, there is no checklist of criteria or conditions which allows scope for a judgement call. Ultimately, it will be a case of weighing up all of the factors and taking a reasonable and balanced view based on the physical attributes of the property.

This can therefore be a subjective process and determining whether or not an annex qualifies as a dwelling for MDR purposes may subject taxpayers to queries from HMRC given it is in HMRCs best interests that the annex does not qualify as a dwelling!

How can ETC Help?

ETC Tax are qualified and specialist tax advisers who have helped a number of clients make successful claims for MDR. With HMRC actively challenging MDR claims, it would be worth getting advice from a specialist who is familiar with the existing and growing case law and can present the best possible case for a claim.

If you think you may have grounds for a claim, please do not hesitate to get in touch. We are happy to review your circumstances and provide our initial thoughts on the prospects of an MDR claim.

Read about building in your garden or more property tax articles below…

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.