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Tribunal decides that a flat within a house is not a single dwelling

People who invest in a property that has an annexe and therefore believe they have acquired two properties and can claim stamp duty relief may be disappointed, according to leading tax and advisory specialists. 

Last month a Tribunal ruled against two individuals that appealed against HMRC’s decision to refuse to repay £10,000 of stamp duty and this will not be the first with reclaim companies frequently making unsolicited approaches to those that invest in houses with annexes offering to get stamp duty back for a success fee.

Sean Randall, a partner at Blick Rothenberg, commented: “The taxpayers’ argument was that the purchased property consisted of two dwellings, meaning that it qualified for partial stamp duty relief or “multiple dwellings relief”.

“Although the property contained an annex and the annex had all the facilities reasonably required for separate living accommodation, it was connected with the main house internally by an open corridor. One of the ends of the corridor had door jambs [the doorframe on which a door could be hung].”

The taxpayers argued that the work involved in hanging a door was merely remedial work and hence the absence of a door on the completion date could be ignored. Alternatively, they argued, that an internal door was not needed to make the annex “suitable for use” as a single dwelling - the statutory test - because the occupants of both parts of the property could be in a trusted relationship. 

However, the tribunal rejected both arguments. It held that the property was suitable for use as one joined dwelling.

Randall added: “This is likely to be the first of a number of tribunal decisions on multiple dwellings relief and annexes. 

“In the absence of narrower wording in the statute and the significant tax savings to be made, it is understandable that reclaim companies are testing where the boundary is. 

“One wonders whether the decision would have been different in this case if the required work post completion would have involved reinstating a physical barrier between the two sides to the property rather than introducing a new physical barrier. It certainly shows that small details like this can have a big impact on tax.”

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