In a rare win for the taxpayer, the First-tier Tribunal (FTT) has in the case of Johnson v Revenue and Commissioners [2025] UKFTT 50 (TC) allowed a claim for multiple dwellings relief previously refused by HM Revenue & Customs (HMRC).
The taxpayer acquired a residential property for £1.17m and initially paid £60,750 stamp duty land tax (SDLT). He later requested a repayment of £22,250 on the basis that multiple dwellings relief (MDR) applied to his purchase because the property contained two dwellings, namely the main house and an annexe.
MDR applied where an interest in a least two dwellings were acquired and could make a significant difference in reducing taxpayers' SDLT liabilities. MDR was abolished for transactions with an effective date on or after 1 June 2024 but can, subject to transitional provisions, still apply in certain circumstances.
HMRC took the view that the taxpayer could not claim MDR as the annexe was not suitable for use as a single dwelling and therefore, the property only consisted of one dwelling.
The annexe had its own fully fitted kitchen, a bedroom, bathroom and living space. It had its own boiler and control of all of its own utilities. It could be accessed independently of the main house and had a driveway separate from that of the main house. It had a separate council tax listing to the main house but shared the same address with it. The stopcock for the annexe was in the main house as was the electricity meter. The gas and water meters were located outside the annexe but were accessible to the occupants of it (and the occupants of the main house).
A letter from the Valuation Agency Office (VAO) to the taxpayer, in response to his request for the annexe to be merged with the main house to form a single council tax banding was refused on the basis that the VAO considered the annexe to be a 'fully self-contained unit'.
Two key issues for HMRC were security and privacy.
There was an interconnecting door between the main house and the annexe which was not lockable at the date the taxpayer acquired the property. HMRC considered that this meant that the occupants of the main house and the annexe lacked both privacy and security that one would expect from a dwelling as they could both move freely between the two. The taxpayer solved this problem by the use of telescopic door braces on either side of the interconnecting door which once in place, meant the door could not be opened from the other side. No structural alterations were made to the property to fit the braces and the FTT concluded that these made the interconnecting door sufficiently secure from both sides to provide adequate security to the occupants of the main house and the annexe.
HMRC also took the view that because the annexe’s external door opened directly onto the garden of the main house enabling the occupant of the annexe to look directly into parts of the main house, this was an unacceptable invasion of privacy that would lead an objective observer to conclude that the property could not be two separate dwellings. The taxpayer considered that HMRCs privacy concern could be addressed in a tenancy agreement with the occupant of the annexe which the FTT agreed with. The FTT also noted that it not uncommon for adjacent properties to overlook other properties in some settings and considered that any privacy issues in these circumstances could be cured by the use of blinds/shutters or curtains.
Taking all facts into consideration, HMRC concluded that the annexe was a separate dwelling from the main house and that MDR could be claimed in respect of the purchase of the property.
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