A ‘contrived’ attempt to claim Multiple Dwellings Relief (MDR) on a property has left the owner’s with an £80,000 tax bill after a first tier tribunal (FTT) ruled MDR did not apply.
The property in question, a six-bedroom home in Upper Basildon, Berkshire, was transacted in August 2020. The tribunal was told the solicitors for the buyers submitted the SDLT return identifying the property as a single residential dwelling, using ‘Code 01’. The SDLT due for the Property was £138,750, which was paid.
In January 2021, under separate representation, an amended SDLT return was filed to include a claim for MDR on the basis that the Property consisted of two separate dwellings; the main house and a separate indoor pool and bedroom above a double garage which did not belong to the main house. The relief was claimed on the basis the property was in fact two dwellings, separated by a lockable glass door.
The owners contended the separate pool and bedroom was a separate dwelling, and MDR was applicable; amending the SDLT due to £57,500, a saving of £81,250.
But Judge Ruthven Gemmell said the claim was ‘simply a device’ to avoid a £81,250 tax bill, and described efforts to convince HMRC otherwise as ‘contrived’ in the FTT report:
“The concept of a one bedroom (which also served as a living room) property, with a hallway, small kitchen and WC/shower room, with a swimming pool, some four times the area of the latter three areas, was contrived.”
adding
“The tribunal considered that an average purchaser would be unlikely to purchase the main house without the swimming pool, not least because of its situation and its effect on the privacy of the Main House, but also because it is a desirable amenity of a property of that value.”
Multiple Dwellings Relief has been abolished for transactions which complete, or which substantially perform, on or after 1 June 2024. Purchasers who exchanged contracts on or before 6 March 2024 remain eligible for MDR regardless of when the transaction completes, provided there is no variation of the contract after that date.
In the last week The Law Society of England and Wales has warned against what it describes as ‘spurious’ SDLT relief claims brought by agents with little or no expertise or understanding HMRC guidance. Law Society president Richard Atkinson said
“The Law Society is concerned about the approach being taken by some agents that offer help with stamp duty land tax (SDLT) refunds. Some of these firms are set up by people with little or no expertise in SDLT and pay little or no regard to HM Revenue and Customs’ (HMRC) guidance on standards for agents. The Law Society and HMRC have joined forces to warn people of the risks associated with SDLT repayment agents and to explain how solicitors can take steps to protect clients.
An article published on the Law Society website provides further insight and guidance on how conveyancers and property lawyers can best advise clients. Addressing the main issues of concern the piece discusses the legal position, and HMRC guidance in relation to chattels apportionment, properties considered ‘not suitable for use,’ and properties with ‘communal gardens’ and ‘communal facilities’ – where several tribunals have found that a residential property acquired with the right over communal gardens is wholly residential
