With the higher end UK residential property market beginning to fizz again, don’t forget Stamp Duty nuances!

There are a range of statutory reliefs from Stamp Duty Land Tax (SDLT), which have long been misunderstood by house purchasers and their legal teams, meaning that SDLT is often overpaid.

One such relief (Multiple Dwellings Relief – MDR) has been on an interesting journey.  Introduced in 2011, yet largely ignored by everyone involved in property conveyancing until at least 2016, the last 4 years have seen a significant number of post-transaction SDLT reclaims (and claims against Solicitors where those claims were timed out).

Fortunately, more and more legal firms have become conscious of MDR, albeit perhaps not the full extent of it.  As a result, more claims are being made pre-purchase and the correct (lower) amount of SDLT is therefore being paid on completion.

In short, where a property comprises two (or more) ‘dwellings’, MDR may apply to significantly reduce the level of SDLT payable.  Understanding fully what constitutes a ‘dwelling’ is critical, but the scope is unexpectedly broad.  In no small part this is because, for decades, HMRC and local authorities have sought to widen that definition through the Courts to increase council tax take.  As a result, the term dwelling (as now prescribed by HMRC for SDLT purposes) is formally defined as “a building or part of a building which is suitable for use as a single dwelling”.  It is notably suitability, as opposed to actual use, which is important.

Inevitably, it continues to fall to the Courts to build parameters around such vagaries.  In the recent tax tribunal case (Keith Finder & Samantha Brower v HMRC), HMRC successfully argued that MDR should not apply, largely because there was no physical barrier between the main property and an annexe.  Whilst the annexe was accepted as having all the facilities reasonably required to be a separate dwelling, it was connected with the main house internally by an open corridor – security and privacy were therefore lacking.   The simple existence of a lockable door at the time of completion would seemingly have made all the difference in this case!

With details like this being important, the best advice we can give is to consider SDLT properly before the property purchase.  If you would like to discuss, do not hesitate to contact either James Cornish or Richard White on 01788 539000.