Tribunal confirms multiple dwellings relief claim in SDLT appeal

In Michelle Jacqueline Berrell & Anor v HMRC [2025] UKFTT 1067 (TC), the First-tier Tribunal (FTT) allowed the taxpayers' appeal and confirmed their claim for Multiple Dwellings Relief (MDR).

Background

The appeal concerned the availability of MDR for Stamp Duty Land Tax (SDLT) purposes on the purchase of a property consisting of a house and an annexe.

On 15 December 2021, Michelle Jacqueline Berrell and Rory James Thomas (the Taxpayers) completed the purchase of a residential property in Aylesbury for £492,000 (the Property). The Taxpayers filed an SDLT return in respect of the purchase without claiming MDR and paid SDLT of £14,600. On 12 July 2022, the Taxpayers filed an amendment to the original SDLT return reclaiming SDLT of £9,680, on the basis that MDR applied. 

The Property consisted of a modern detached red-brick three-bedroom house (the Main House) plus an attached single-storey annexe (formerly a garage) which included a studio room (living/bedroom), toilet and shower room, and a utility room with a sink and high voltage cook connection (the Annexe). The Main House and the Annexe had independent access via a front porch. The porch door from the front led to two internal doors, one into the Main House and one into the Annexe. At the time of purchase, the Annexe relied on the Main House’s boiler for hot water. The two parts did not have separate utility meters, separate council tax registration, or separate Land Registry titles. They did share a driveway and front porch. A narrow rear hallway situated between the Main House kitchen and the Annexe utility provided access to the garden.  

On 22 March 2023, HMRC opened an enquiry into the SDLT reclaim and on 13 October 2023, issued a closure notice rejecting the MDR claim. On 21 February 2024, following the outcome of an internal review upholding the closure notice, the Taxpayers appealed to the FTT.

The dispute centred on the correct interpretation of Schedule 6B, Finance Act 2003 (FA 2003), which provides for MDR, and specifically paragraph 7(2)(a), which defines a “dwelling” as a building or part of a building that is “used or suitable for use as a single dwelling”. The test for “suitable for use as a single dwelling” has been discussed in cases such as Fiander and Brower v HMRC [2021] UKUT 0156 (TCC) and requires assessment of the physical attributes of the property under consideration at the effective date (i.e. completion). It is also necessary to consider whether the unit affords facilities for the occupant’s basic domestic needs (sleeping, hygiene, and cooking) and has a degree of privacy, self-sufficiency and security. 

HMRC contended that the Annexe lacked sufficient independence (due to shared access, lack of separate meters, reliance on the main boiler, lack of separate title and apparent marketing as a single dwelling) and that the hallway arrangement undermined privacy and security. 

The Taxpayers argued that the Annexe was clearly capable of independent occupation and that the shared elements did not preclude the unit being a separate dwelling for the purposes of MDR.

The appeal required the FTT to determine whether the transaction’s “main subject-matter” consisted of “at least two dwellings” within Schedule 6B, and in turn whether the property comprised two units, each suitable for use as a single dwelling at the effective date. 

FTT decision

The appeal was allowed.

The FTT accepted the agreed facts, including Ms Berrell’s evidence, and took the effective date as being15 December 2021.

In reaching its decision, the FTT applied the multifactorial test to be applied in determining whether MDR applies, as set out in Fiander and considered all relevant physical attributes of the Property and the context, as at the effective date. In so doing, it identified a set of features pointing in favour of the Main House and the Annexe being separate dwellings. The Annexe had a studio living/bedroom room, its own shower and toilet, a utility room with a sink and a high-voltage cooker connection (so capable of cooking without physical alteration) and separate access via a lockable front door (albeit through a shared porch). There was independent electrical heating, a separate fuse box, separate stop tap, running water and mains electricity, for the Annexe. In the view of the FTT, these features were “strong” indicators of suitability for separate occupation. 

However, a number of factors did point against separate dwellings. The shared driveway and front porch, lack of separate utility meters, shared boiler hot water supply, no separate council tax registration or separate Land Registry title and, significantly, the configuration of the rear hallway and the doors to the garden, raised difficult issues of privacy and security. 

With regard to the question of terms of occupation, HMRC argued that the FTT should not envisage hypothetical terms of tenancy or occupation. The FTT rejected such a rigid approach. In the view of the FTT, whilst the physical attributes at completion must be the starting point, the test does not exclude consideration of “realistic legal terms on which such occupancy could be granted”, as part of the multifactorial assessment. The FTT considered three potential models for the hallway arrangement: 

(i) hallway being part of the Main House; 

(ii) hallway being communal; 

(iii) hallway being part of the Annexe. 

It concluded that the “most practical” model was the hallway being communal and the Main House having exclusive use of the garden, with the Annexe not having independent garden access. While acknowledging practical difficulties (including the one-way bolt door in the Annexe and garden access restrictions), the FTT concluded that a reasonable objective observer could envisage terms of occupation that addressed the privacy/security issues. 

Weighing all the factors, the FTT found that despite the shared hallway and some limitations, the Annexe was suitable for use as a separate dwelling, within the meaning of paragraph 7(2)(a), Schedule 6B, FA 2003 and MDR therefore applied.

Comment

This decision reinforces that the test for “dwelling”, under Schedule 6B, is fact-specific and multi-factorial. Shared access or utilities will not automatically disqualify a unit from being a “dwelling”. The FTT's willingness to envisage realistic occupancy terms, including shared common areas and garden access restrictions, provides a more nuanced approach than a rigid 'fully self-contained' test.

For property purchasers considering MDR when acquiring a property with an annexe (or sub-unit), this case highlights the importance of establishing as many self-contained features as possible at completion, such as: independent entrance, bathroom, kitchen capability, heating, and stop-tap/fuse box. Equally, it demonstrates that some shared elements, such as driveway, utility meters and garden access, will not necessarily prevent MDR if, overall, the sub-unit is suitable for separate occupation and privacy/security can be managed under realistic terms.

The decision also serves as a reminder that planning permission wording (e.g. labelling an annexe as 'ancillary') and marketing a property as a single dwelling, whilst factors to be taken into consideration, are not determinative.

The decision can be viewed here.