Multiple Dwellings Relief and the suitability of separate dwellings – Fiander and Brower v HMRC

Author

Thomas Slipanczewski

A tax adviser, Thomas joined ETC Tax in September 2018.

The First-tier Tribunal has recently handed down the decision on Fiander and Brower v HMRC [2020] UKTT 190 (TC), which resulted in a claim for Multiple Dwellings Relief (‘MDR’) being rejected.

This decision fits more widely into HMRC’s approach in seeking to closely scrutinise increasingly popularised marketed SDLT reclaims services, by many firms, worryingly with limited experience and regulation within the sector. Following this decision, it is likely that HMRC will seek to use this as leverage to further closely examine such claims.

My colleague Robert Wilson has provided a helpful article on the details and mechanics of MDR [https://www.etctax.co.uk/stamp-duty-land-tax-sdlt-multiple-dwellings-relief-mdr-the-facts/], and therefore, I do not propose to cover this here.

The Facts

The acquisition consisted of a main house, with an annex, connected by a corridor. Both the main house and the annex comprised of a living room/siting room, a kitchen, bedroom(s) and a bathroom. The annex did not have its own post-box, council tax bill or utility supply.

The tribunal held both the main house and the annex were able to accommodate the basic domestic living needs of the occupants, providing for sleeping, eating, cooking, and washing and sanitary needs, alongside a place to relax. It was also held that occupants could carry on their daily lives without passing through common areas in the connected property, with both having separate, exclusive entrances.

The Decision

Despite the tribunals findings above, the taxpayers’ claim for MDR was rejected on the basis that, (1) the occupants would have had unimpeded access from one property to the other and therefore, there would be an insufficiency of privacy and security for occupants of both parts; and (2), the short open corridor connecting the main property to the annex were too closely connected for either to be suitable for use as a single dwelling.

Interestingly, the taxpayer also added an alternative argument, although at the time of completion it may not have been two separate dwellings, the test for the tribunal to consider is whether it is “suitable for such use”. Therefore, simply bricking up the doorway may render it suitable for such use as two separate dwellings. However, the tribunal confirmed that suitability can only be based on the objective features of the property at the time of completion and bricking up a doorway would be a new feature, even where such features are ‘easy or quick to install’.

Implications

Albeit this is only a decision of the First tier Tribunal, it emphasises the importance of assessing the functionality of the properties where an MDR claim is being assessed and questioning whether, (1) in a practical sense, each property is mutually private and secure from the other; and (2), where the answer to (1) is ‘no’, on an objective assessment of the properties’ physical features at the point of completion, can the property be restored or repaired to give an answer of ‘yes’ to (1)? Where it cannot and on an objective assessment of the physical features of the property, new additional features are required to satisfy (1), whether or not those new features are quick or easy to install, it will not be suitable for such use as two separate dwellings, for the purposes of MDR.

Our Services

At ETC Tax we have an experienced and specialist team who have a wealth of experience in advising on SDLT matters.

If you or your client would like any assistance in relation to any of the issues raised above, then please get in touch.

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