Stamp Duty Land Tax – Being Careful with Multiple Dwellings Relief
Five years ago, Magma were one of the first to recognise that eligible claims for Multiple Dwellings Relief (MDR) were being missed by property purchasers across the board. Since then, we have successfully secured millions of pounds of unexpected Stamp Duty Land Tax (SDLT) savings for purchasers (whether by refund or in advance of purchase). Our understanding of the rules and HMRC practice in this area is simply second to none.
Like all tax reliefs, there are clear limits to MDR. Unfortunately, these limits have now been stretched too far by a surge of less credible claims, some of which HMRC have successfully challenged through the Courts.
HMRC’s latest success came in the case of a £915,000 property purchase in Hampshire. The taxpayers claimed that an area of the ground floor accommodation comprised a separate annexe, which should be treated as a second dwelling for MDR purposes, thus reducing the SDLT payable by circa £10,000.
The First Tier Tax Tribunal ruled that (as HMRC had contended), the living and bathing facilities of the ‘annexe’ were not fully sectioned off from the remainder of the property and thus it could not be accepted as an independent dwelling. MDR was therefore denied and the taxpayer now has the legal costs to worry about, as well as the additional SDLT.
MDR remains one of a number of very lucrative reliefs from SDLT, but proper advice in making a claim is now more important than ever. To discuss SDLT on a UK property purchase (past or present), please contact our Private Client tax team on 01788 539000 or email [email protected].