SLDT Stamp Duty - MDR Multiple Dwellings Relief - First time buyers

mattcole89

Hello,

My name is Matt and am looking for any help regarding purchase of a property which has an attached annexe. I have spent weeks trying to get to the bottom of this and am going around in circles! I have just found this forum so hoping someone out there can help!

The scenario;

- myself and my partner have had an offer of £342,000 accepted on a property which includes an annexe. We are first time buyers.
- the property is "freehold".
- the property is listed with Royal Mail as numbers 4A/4B as opposed to just number 4.
- the property is listed on the land registry as number 4 as opposed to 4A/4B. It appears that the property is listed as just number 4 with regards to council tax so i assume that council tax is paid on the property as a whole.
- the annexe has been in existence for at least 20 years, probably even 30 years.
- the annexe has its own bathroom/front door/kitchen etc and does not have access via the main property.
- we have had a full survey done - this says that the annexe has it's own supply of gas/water/electric.

The unfolding of events;

- offer of £342,000 accepted
- instructed solicitor. I hadn't even considered that it was classed as 4A/4B (even though it is on the documents from the estate agents) so just told the solicitor it was number 4.
- solicitor provided quote for their works and also stated that stamp duty would be £2,100 as we are first time buyers.
- solicitor received documents from estate agents. Got in contact saying that as it is in fact 4A/4B, we would not be able to claim first time buyers relief. However, solicitor stated that we may be able to claim "multiple dwellings relief". Solicitor stated that it would have to be referred to a qualified SDLT advisor.
- SDLT advisor has suggested that SDLT due would be £7,760 as it would be a "linked transaction".
- they have also advised that if we were to convert the 2 properties into 1 dwelling within 3 years of purchase, the SDLT would then increase to £12,200. Therefore we would have to pay an additional £4,440.

Our initial plan when we assumed we were eligible for "first time buyers relief" was to convert 4A/4B into one property. Both 4A/4B are in need of full refurbishment - to the point that a full electrical re-wire is required as is a complete new heating system. It has issues with rising damp and kitchens/bathrooms are at least 20-30 years old. Realistically, we estimate works to be between £80,000-£100,000.

The £10,000 difference between what we thought would be our initial SDLT (£2,100) and the £12,200 quoted by the SDLT advisor (should we convert into 1 property within 3 years) could really throw a spanner in the works!

Therefore we have now adjusted our initial plan to avoid paying the additional stamp duty to convert into 1 property. We would leave the annexe to be (in HMRC's words) "capable for use as a single dwelling" for 3 years before removing the kitchen/bathroom/front door etc and knocking through a few doorways from the main property. However, we would intend to put it on the same electrical/heating/gas supplies as the main property immediately to avoid additional works after 3 years. We do not intend to let the annexe out or have anyone living in it - we would simply leave it in it's current (terrible) condition for 3 years and then renovate it once it was integrated with the main property.

The annexe is 2 stories. i.e. ground and first floor. Ideally (assuming we are able to do so in the eyes of the law - without incurring any additional SDLT) we would want to take the 1st floor from the annexe and integrate this into the main property immediately. The annexe would still have a bedroom/kitchen/bathroom/front door/living room on the ground floor so would (again, in HMRC's words), "be capable for use as a single dwelling" despite integrating the 1st floor into the main property.

Hopefully, i have adequately given enough info for you to provide the answers to my below questions!

My questions;

- 1 -

Is it correct that we can not claim "first time buyers relief" in this scenario as we are purchasing "multiple dwellings" in one transaction? I think this is correct but would love it if this is not the case!!

- 2 -

How has the SDLT advisor calculated the figures of £7,760 and £12,200 based on a property value of £342,000?

When searching for "multiple dwellings relief" on google, the first result is from the HMRC website -

This states the following;

"You can claim relief when you buy more than one dwelling where a transaction or a number of linked transactions include freehold or leasehold interests in more than one dwelling.

If you claim relief, to work out the rate of tax HMRC charge:

- divide the total amount paid for the properties by the number of dwellings
- work out the tax due on this figure
- multiply this amount of tax by the number of dwellings

The minimum rate of tax under the relief is 1% of the amount paid for the dwellings."

My calculation based on this is as follows;
- total amount = £342,000
- number of dwellings = 2
- value of each dwelling (£342,000 divided by 2) = £171,000

This is where i am unsure of the next step - it says to work out the tax due on this figure. I'm assuming that this is using the SDLT calculator on the HMRC website?

If so, i have gone through every different option on it - the maximum that it says is due on a property value of £171,000 is £920.

Therefore, if we multiply the £920 by the number of dwellings (2), it comes to a total SDLT of £1,840.

My understanding is that as £1,840 is less than 1% of the total purchase price of £342,000, we would actually have to pay the minimum rate of relief (1%) on the purchase as a whole. Therefore, whereas the SDLT advisor has stated that SDLT due would be £7,760, assuming i'm not missing something, surely it would actually be 1% of the purchase price, so £3,420??

- 3 -

As for the £12,200 which the SDLT advisor has stated would need to be paid if we were to convert into 1 dwelling within 3 years, where on earth has this figure come from?! As stated above, i have gone through the SDLT calculator (to the point i have 8 pages of A4 paper taped together) and created a flow chart which covers every possible combination of answers. Nowhere throughout the figures generated, does it bring up £12,200 as the SDLT due. Even adding any 2 of the outcomes together, there is no combination of any 2 outcomes which total £12,200. In fact, other than one anomaly, the maximum SDLT for any combination of answers is £7,100.

The anomaly is if i answer the questions as follows;
- Freehold
- Residential
- Purchasing as an individual
- Purchase will result in owning 2 or more properties
- The purchased property is NOT replacing our main residence (we are first time buyers - we currently live in a rented property but surely in terms of SDLT, they cant say that as we are moving from rented to a property we would own, it would be replacing our main residence??)
- Purchase price - £342,000

In this case, SDLT comes to £17,360. Again, this does not correspond to any of the figures quoted by the SDLT advisor.

- 4 -

Would we benefit from not claiming MDR in the first place? Or do we have to claim it as the transaction is for a property with an annexe which is "suitable for use as a single dwelling"?

If we don't have to claim MDR, what SDLT would we have to pay?

If we don't claim MDR, can we just convert in to 1 property without any further SDLT to be paid if/when we convert into 1 property within 3 years?

- 5 -

Assuming we claim MDR, can we take the 1st floor of the annexe and make it part of the main house? Leaving the ground floor of the annexe (for 3 years) "suitable for use as a single dwelling" as it would still have kitchen/front door/bathroom/living room/bedroom. Or, would the annexe have to remain the same size as when it was purchased. We wouldn't rent it out/have anyone living in it as it requires full renovation (we would leave in same state as it is now and it wouldn't be used). After 3 years, we would knock though from the main house to the annexe and renovate the annexe at that point (as part of the main house).

- 6 -

The annexe currently has separate supplies to that of the main property for water/electricity/gas. We would intend to immediately put the annexe on the same supplies of water/gas/electricity as the main house. Assuming we do the works mentioned above, i.e. taking the 1st floor from the annexe and converting into the main property, AND, also putting the remaining ground floor of the annexe on the same water/gas/electricity system as the main house, would it still be classed as "capable for use as a single dwelling" ?

- 7 -

Regarding council tax - the estate agent has advised us that currently, council tax is paid on 4A/4B as a whole. i.e. 4A and 4B do not receive separate council tax bills. This is also backed up by the .gov.uk website with regards to council tax which only makes reference to number 4 as opposed to 4A/4B. Assuming we took the 1st floor away immediately from 4B (the annexe), and put the annexe on the same water/gas/electricity system (immediately, as opposed to after the 3 years), i'm assuming they would still only be requesting council tax for 4A/4B as a whole as they currently are?

Worst case scenario regarding council tax - if they did say that they were changing it to being 2 lots of council tax, as we would be leaving the annexe unoccupied, would we still have to pay 2 lots of council tax? Or, do you not have to pay council tax on an un-occupied property?

REALLY SORRY FOR SUCH A LONG POST! I HAVE TRIED TO COVER EVERYTHING FROM THE START AS OPPOSED TO GIVING LITTLE INFORMATION THEN ASKING HUNDREDS OF QUESTIONS!

I APPRECIATE THAT IT IS GOING TO TAKE YOU A LONG TIME TO GO THROUGH THIS POST AND THAT MOST READERS WILL PASS IT BY AS IT IS SO LONG WINDED!

HOWEVER, IF YOU HAVE GOT THIS FAR DOWN, YOU CLEARLY KNOW YOUR STUFF OR YOU WOULD HAVE STOPPED READING A LONG TIME AGO!

ANY ADVICE ON ANY OF THE POINTS WOULD BE GREATLY APPRECIATED. HOWEVER, IF YOU ARE FSA QUALIFIED, ASSUMING YOU ARE IN AGREEMENT THAT OUR CURRENT SDLT ADVISOR IS NOT PROVIDING THE CORRECT FIGURES, WE ARE HAPPY TO PAY FOR YOUR SERVICES.

ALL WE NEED AT THIS MOMENT IN TIME IS THE ACTUAL FIGURES OF SDLT WHICH WE WOULD BE DUE TO PAY. OUR SOLICITOR WILL NOT PROCESS THE PURCHASE WITHOUT WRITTEN CONFIRMATION FROM SOMEONE QUALIFIED TO PROVIDE THE ABOVE INFO. IF IT IS LESS THAN OUR CURRENT SDLT ADVISOR IS QUOTING, I WOULD RATHER PAY YOU TO DO IT CORRECTLY THAN PAY SOMEONE WHO IS GIVING US INCORRECT INFORMATION AND SUBSEQUENTLY INCREASING OUR TAX BILL!

Many thanks in advance and if you have got this far down the page without falling asleep, i look forward to any responses!

Thanks,
Matt

AnotherJoe

Why haven't you asked the SDLT specialist how they derived their numbers?
Do HMRC and LR have different definitions of multiple dwellings? As a layman I'd have thought that since there's one council tax and one LR entry, it's one property?
If the post office didn't have two addresses for it, would this issue even have arisen? Could the seller get the number changed with the post office back to number 4 which after all is what the LR entry says?
And, irrespective what the post office says, you are buying number 4 are you not? As far as I can see you cannot buy separately 4a and 4b so are you not buying a single property that just happens to have an extra kitchen upstairs ?
P.s. I don't beleive you can alter any of these taxes by doing things retrospectively. If for example it turns out thata kitchen upstairs mean it is a multiple dwelling, you need the sellers to remove it before you buy, not after.

SDLT_Geek

mattcole89 wrote: »

Hello,

My name is Matt and am looking for any help regarding purchase of a property which has an attached annexe. I have spent weeks trying to get to the bottom of this and am going around in circles! I have just found this forum so hoping someone out there can help!
Have you looked at the material here https://www.blakemorgan.co.uk/news-events/blog/additional-3-stamp-duty-land-tax-surcharge-granny-/ and (on first time buyers' relief) https://www.blakemorgan.co.uk/news-events/blog/sdlt-first-time-buyers-relief/ yet?

The scenario;

- myself and my partner have had an offer of £342,000 accepted on a property which includes an annexe. We are first time buyers.
- the property is "freehold".
- the property is listed with Royal Mail as numbers 4A/4B as opposed to just number 4.
- the property is listed on the land registry as number 4 as opposed to 4A/4B. It appears that the property is listed as just number 4 with regards to council tax so i assume that council tax is paid on the property as a whole.
- the annexe has been in existence for at least 20 years, probably even 30 years.
- the annexe has its own bathroom/front door/kitchen etc and does not have access via the main property.
- we have had a full survey done - this says that the annexe has it's own supply of gas/water/electric.

The unfolding of events;

- offer of £342,000 accepted
- instructed solicitor. I hadn't even considered that it was classed as 4A/4B (even though it is on the documents from the estate agents) so just told the solicitor it was number 4.
- solicitor provided quote for their works and also stated that stamp duty would be £2,100 as we are first time buyers. This figure of £2,100 would be correct for a single dwelling with first time buyers' relief
- solicitor received documents from estate agents. Got in contact saying that as it is in fact 4A/4B, we would not be able to claim first time buyers relief. Correct. However, solicitor stated that we may be able to claim "multiple dwellings relief". A good call. Solicitor stated that it would have to be referred to a qualified SDLT advisor.
- SDLT advisor has suggested that SDLT due would be £7,760 as it would be a "linked transaction". I make it £12,100 on the basis of MDR without one being "subsidiary" to the other.
- they have also advised that if we were to convert the 2 properties into 1 dwelling within 3 years of purchase, the SDLT would then increase to £12,200. I make it £17,360 Therefore we would have to pay an additional £4,440. I make it £5,260.

Our initial plan when we assumed we were eligible for "first time buyers relief" was to convert 4A/4B into one property. Both 4A/4B are in need of full refurbishment - to the point that a full electrical re-wire is required as is a complete new heating system. It has issues with rising damp and kitchens/bathrooms are at least 20-30 years old. Realistically, we estimate works to be between £80,000-£100,000. Have you looked at the P N Bewley case? There is an article here https://www.blakemorgan.co.uk/news-events/blog/too-derelict-be-dwelling/ Perhaps one part is so derelict that it is not a dwelling at all and is not in the process of conversion. SDLT would then be £6,600.

The £10,000 difference between what we thought would be our initial SDLT (£2,100) and the £12,200 quoted by the SDLT advisor (should we convert into 1 property within 3 years) could really throw a spanner in the works!

Therefore we have now adjusted our initial plan to avoid paying the additional stamp duty to convert into 1 property. We would leave the annexe to be (in HMRC's words) "capable for use as a single dwelling" for 3 years before removing the kitchen/bathroom/front door etc and knocking through a few doorways from the main property. However, we would intend to put it on the same electrical/heating/gas supplies as the main property immediately to avoid additional works after 3 years. That integration work, depending on what it is, could itself be enough to make the two parts one dwelling. It is not common to have two dwellings where their electrical circuits and heating systems are closely integrated to the point where they cannot be separately operated and isolated.
We do not intend to let the annexe out or have anyone living in it - we would simply leave it in it's current (terrible) condition for 3 years and then renovate it once it was integrated with the main property.

The annexe is 2 stories. i.e. ground and first floor. Ideally (assuming we are able to do so in the eyes of the law - without incurring any additional SDLT) we would want to take the 1st floor from the annexe and integrate this into the main property immediately. The annexe would still have a bedroom/kitchen/bathroom/front door/living room on the ground floor so would (again, in HMRC's words), "be capable for use as a single dwelling" despite integrating the 1st floor into the main property. But the services (such as heating, electricity, hot and cold water) might not then stand independently for the new configuration of the two parts.

Hopefully, i have adequately given enough info for you to provide the answers to my below questions!

My questions;

- 1 -

Is it correct that we can not claim "first time buyers relief" in this scenario as we are purchasing "multiple dwellings" in one transaction? Correct, if two dwellings are bought in one transaction; also if two dwellings are bought in two linked transactions I think this is correct but would love it if this is not the case!!

- 2 -

How has the SDLT advisor calculated the figures of £7,760 and £12,200 based on a property value of £342,000? I do not know, they do not look right to me. You should ask the advisor.

When searching for "multiple dwellings relief" on google, the first result is from the HMRC website -

This states the following;

"You can claim relief when you buy more than one dwelling where a transaction or a number of linked transactions include freehold or leasehold interests in more than one dwelling.

If you claim relief, to work out the rate of tax HMRC charge:

- divide the total amount paid for the properties by the number of dwellings
- work out the tax due on this figure
- multiply this amount of tax by the number of dwellings

The minimum rate of tax under the relief is 1% of the amount paid for the dwellings."

My calculation based on this is as follows;
- total amount = £342,000
- number of dwellings = 2
- value of each dwelling (£342,000 divided by 2) = £171,000

This is where i am unsure of the next step - it says to work out the tax due on this figure. I'm assuming that this is using the SDLT calculator on the HMRC website?

If so, i have gone through every different option on it - the maximum that it says is due on a property value of £171,000 is £920.

Therefore, if we multiply the £920 by the number of dwellings (2), it comes to a total SDLT of £1,840.

My understanding is that as £1,840 is less than 1% of the total purchase price of £342,000, we would actually have to pay the minimum rate of relief (1%) on the purchase as a whole. Therefore, whereas the SDLT advisor has stated that SDLT due would be £7,760, assuming i'm not missing something, surely it would actually be 1% of the purchase price, so £3,420??
I would agree with your figures and method here, but only if you had a situation where the 3% surcharge did not apply. You have not said that one dwelling is worth at least 2/3 of the total, so I would expect the subsidiary dwelling test to be failed and the higher rates to apply. Using the on line calculator in the same way and then doubling it, you get to SDLT of £12,100.

- 3 -

As for the £12,200 which the SDLT advisor has stated would need to be paid if we were to convert into 1 dwelling within 3 years, where on earth has this figure come from?! I do not know, I make this £17,360 As stated above, i have gone through the SDLT calculator (to the point i have 8 pages of A4 paper taped together) and created a flow chart which covers every possible combination of answers. Nowhere throughout the figures generated, does it bring up £12,200 as the SDLT due. Even adding any 2 of the outcomes together, there is no combination of any 2 outcomes which total £12,200. In fact, other than one anomaly, the maximum SDLT for any combination of answers is £7,100.

The anomaly is if i answer the questions as follows;
- Freehold
- Residential
- Purchasing as an individual
- Purchase will result in owning 2 or more properties
- The purchased property is NOT replacing our main residence (we are first time buyers - we currently live in a rented property but surely in terms of SDLT, they cant say that as we are moving from rented to a property we would own, it would be replacing our main residence??)
- Purchase price - £342,000

In this case, SDLT comes to £17,360. This is the SDLT if you bought two dwellings in one transaction and either did not claim MDR, or there was a clawback of MDR. The higher rates apply because of buying two dwellings in one transaction without one being subsidiary to the other. Again, this does not correspond to any of the figures quoted by the SDLT advisor.

- 4 -

Would we benefit from not claiming MDR in the first place? Not as such, not if the property as it stands is in fact two dwellings. But you would benefit if you could honestly say that in fact the property is only suitable for use as a single dwelling (SDLT of £2,100), or that one part, whilst previously a dwelling, is not now suitable for use as a dwelling, see P N Bewley referred to above (SDLT of £6,600). Or do we have to claim it as the transaction is for a property with an annexe which is "suitable for use as a single dwelling"? If the property is in fact suitable for use as two dwellings then this is likely to cost you and this is a fact you are stuck with. It is your choice whether or not to claim MDR.

If we don't have to claim MDR, what SDLT would we have to pay? If the property is two dwellings and one is not subsidiary to the other then £17,360. If both parts or one part are so derelict as to be unsuitable for use as a dwelling then £6,600.

If we don't claim MDR, can we just convert in to 1 property without any further SDLT to be paid if/when we convert into 1 property within 3 years? If the property is two dwellings (without one being subsidiary) then you should be paying £17,360 in the first place if there is no MDR claim made.

- 5 -

Assuming we claim MDR, can we take the 1st floor of the annexe and make it part of the main house? Leaving the ground floor of the annexe (for 3 years) "suitable for use as a single dwelling" as it would still have kitchen/front door/bathroom/living room/bedroom. Or, would the annexe have to remain the same size as when it was purchased. There is no requirement for the two dwellings to retain the same configuration to avoid a clawback, but each part must remain sufficiently self contained to count as a single dwelling. We wouldn't rent it out/have anyone living in it as it requires full renovation (we would leave in same state as it is now and it wouldn't be used). After 3 years, we would knock though from the main house to the annexe and renovate the annexe at that point (as part of the main house).

- 6 -

The annexe currently has separate supplies to that of the main property for water/electricity/gas. We would intend to immediately put the annexe on the same supplies of water/gas/electricity as the main house. Assuming we do the works mentioned above, i.e. taking the 1st floor from the annexe and converting into the main property, AND, also putting the remaining ground floor of the annexe on the same water/gas/electricity system as the main house, would it still be classed as "capable for use as a single dwelling" ? Perhaps not. All the factors need to be weighed up. You have not mentioned permitted planning use nor whether there has been a history of separate use of the two parts. Are utilities billed separately to the two parts?

- 7 -

Regarding council tax - the estate agent has advised us that currently, council tax is paid on 4A/4B as a whole. i.e. 4A and 4B do not receive separate council tax bills. This is also backed up by the .gov.uk website with regards to council tax which only makes reference to number 4 as opposed to 4A/4B. Assuming we took the 1st floor away immediately from 4B (the annexe), and put the annexe on the same water/gas/electricity system (immediately, as opposed to after the 3 years), i'm assuming they would still only be requesting council tax for 4A/4B as a whole as they currently are?

Worst case scenario regarding council tax - if they did say that they were changing it to being 2 lots of council tax, as we would be leaving the annexe unoccupied, would we still have to pay 2 lots of council tax? Or, do you not have to pay council tax on an un-occupied property?

REALLY SORRY FOR SUCH A LONG POST! I HAVE TRIED TO COVER EVERYTHING FROM THE START AS OPPOSED TO GIVING LITTLE INFORMATION THEN ASKING HUNDREDS OF QUESTIONS!

I APPRECIATE THAT IT IS GOING TO TAKE YOU A LONG TIME TO GO THROUGH THIS POST AND THAT MOST READERS WILL PASS IT BY AS IT IS SO LONG WINDED!

HOWEVER, IF YOU HAVE GOT THIS FAR DOWN, YOU CLEARLY KNOW YOUR STUFF OR YOU WOULD HAVE STOPPED READING A LONG TIME AGO!

ANY ADVICE ON ANY OF THE POINTS WOULD BE GREATLY APPRECIATED. HOWEVER, IF YOU ARE FSA QUALIFIED, ASSUMING YOU ARE IN AGREEMENT THAT OUR CURRENT SDLT ADVISOR IS NOT PROVIDING THE CORRECT FIGURES, WE ARE HAPPY TO PAY FOR YOUR SERVICES.

ALL WE NEED AT THIS MOMENT IN TIME IS THE ACTUAL FIGURES OF SDLT WHICH WE WOULD BE DUE TO PAY. OUR SOLICITOR WILL NOT PROCESS THE PURCHASE WITHOUT WRITTEN CONFIRMATION FROM SOMEONE QUALIFIED TO PROVIDE THE ABOVE INFO. IF IT IS LESS THAN OUR CURRENT SDLT ADVISOR IS QUOTING, I WOULD RATHER PAY YOU TO DO IT CORRECTLY THAN PAY SOMEONE WHO IS GIVING US INCORRECT INFORMATION AND SUBSEQUENTLY INCREASING OUR TAX BILL!

Many thanks in advance and if you have got this far down the page without falling asleep, i look forward to any responses!

Thanks,
Matt

See the comments on the SDLT aspects above in purple.

SDLT_Geek

AnotherJoe wrote: »

Why haven't you asked the SDLT specialist how they derived their numbers? Good point.
Do HMRC and LR have different definitions of multiple dwellings? The Land Registry are not generally interested in how many dwellings are included in one registered title. It is frequently one, but it could be 2, 10, 100 or part of a dwelling.
As a layman I'd have thought that since there's one council tax and one LR entry, it's one property?
Council tax treatment is more relevant, as the definition the local authority has to apply has similarities to the definition for SDLT which the taxpayer has to apply on a purchase.
If the post office didn't have two addresses for it, would this issue even have arisen? Could the seller get the number changed with the post office back to number 4 which after all is what the LR entry says? Whether there are two postal addresses or one postal address is only one of a number of factors when considering whether a property comprises one or more dwellings.
And, irrespective what the post office says, you are buying number 4 are you not? As far as I can see you cannot buy separately 4a and 4b so are you not buying a single property that just happens to have an extra kitchen upstairs ? The building is being bought and a question is whether the building consists of one or two dwellings. Or perhaps of one dwelling and something that is so derelict as not to be suitable for use as a dwelling (as in Bewley).
P.s. I don't beleive you can alter any of these taxes by doing things retrospectively. If for example it turns out thata kitchen upstairs mean it is a multiple dwelling, you need the sellers to remove it before you buy, not after.

This is right in that generally SDLT is assessed on the basis of the situation as it is at completion of the purchase. Clawback of MDR is an exception.

AnotherJoe

Who is stating it IS two dwellings? Would this have arisen if it were not for the post office?

Or do the separate utilities "define" it as two?
Can you get an HMRC ruling on if its one or two?
Or, possible shortcut here, will the seller drop the price by the extra amount of SDLT given this has arisen due to their changes and not come out until later in the process? Not dissimilar to, say the survey showing it needed a new roof after you'd agreed a price initially?

00ec25

mattcole89 wrote: »

- the annexe has its own bathroom/front door/kitchen etc and does not have access via the main property.

AnotherJoe wrote: »

Who is stating it IS two dwellings? Would this have arisen if it were not for the post office?

Or do the separate utilities "define" it as two?

the fact you cannot get from one to the other internally is somewhat suggestive of separate dwellings ...

the status of a single council tax listing could be down to potential planning permission use/restriction and/or, as the geek queries, whether there is a subordinate dwelling

AnotherJoe

Suggestive yes. But conclusive? If you partitioned a bungalow such that one set of rooms was accessible only from (what was) back door and the others from front, does that make it two? What if its just a locked door in the hall that makes the partition?
When does one dwelling become two? I'd have thought it was when there were two council tax entries? But i could be wholly wrong

SDLT_Geek

AnotherJoe wrote: »

If you partitioned a bungalow such that one set of rooms was accessible only from (what was) back door and the others from front, does that make it two? What if its just a locked door in the hall that makes the partition?

Do you remember the episode of Steptoe and Son "Divided we Stand" when they partitioned the house? https://www.imdb.com/title/tt0796162/ Clearly their efforts were not enough to turn one dwelling into two.

AnotherJoe

I can still remember screaming with laughter when that was broadcast, and the firemen needing to put pennies into the turnstile to get in!


"I've got right on my side"
"I've got the knobs on mine"


(anyone over about 30 wont understand that)

mattcole89

Thanks for your reply.

AnotherJoe wrote: »

Why haven't you asked the SDLT specialist how they derived their numbers? - because they are extremely expensive! Wanted to try and understand everything myself before asking them too many questions. So i intend to go back to them with a better understanding of everything and not pay them to answer questions which i can try to answer myself!
Do HMRC and LR have different definitions of multiple dwellings? As a layman I'd have thought that since there's one council tax and one LR entry, it's one property? You would think so but apparently not the case
If the post office didn't have two addresses for it, would this issue even have arisen? Could the seller get the number changed with the post office back to number 4 which after all is what the LR entry says? No, as it is sold with an annexe, it is classed as 2 properties regardless
And, irrespective what the post office says, you are buying number 4 are you not? As far as I can see you cannot buy separately 4a and 4b so are you not buying a single property that just happens to have an extra kitchen upstairs ?
P.s. I don't beleive you can alter any of these taxes by doing things retrospectively. If for example it turns out thata kitchen upstairs mean it is a multiple dwelling, you need the sellers to remove it before you buy, not after.

mattcole89

Thank you so much for your very helpful response!

My name is Matt and am looking for any help regarding purchase of a property which has an attached annexe. I have spent weeks trying to get to the bottom of this and am going around in circles! I have just found this forum so hoping someone out there can help!
Have you looked at the material here (BLAKE MORGAN LINKS BUT IT WONT ALLOW ME TO INCLUDE THEM IN MY REPLY)

Yes, have looked at this and am still struggling to understand it all!

- SDLT advisor has suggested that SDLT due would be £7,760 as it would be a "linked transaction". I make it £12,100 on the basis of MDR without one being "subsidiary" to the other.

Can you please clarify what "subsidiary" means?


Our initial plan when we assumed we were eligible for "first time buyers relief" was to convert 4A/4B into one property. Both 4A/4B are in need of full refurbishment - to the point that a full electrical re-wire is required as is a complete new heating system. It has issues with rising damp and kitchens/bathrooms are at least 20-30 years old. Realistically, we estimate works to be between £80,000-£100,000. Have you looked at the P N Bewley case? There is an article here (BLAKE MORGAN LINK) Perhaps one part is so derelict that it is not a dwelling at all and is not in the process of conversion. SDLT would then be £6,600.

Yes - this is something i keep coming back to. Surely if the electrics have been deemed unfit, this alone would mean that it wouldn't be suitable for use as a dwelling in it's current state? Also, the stairs in the annexe are in the bathroom - you can touch the stairs whilst sat on the toilet! Again, surely this couldn't meet current building regulations therefore backing up the case? This is just 2 of a long list of things!

Do you know who i would need to ask to give an opinion on whether the annexe is suitable for use as a dwelling? To stand up legally if we were to get any problems in the future where HMRC try to claim that we owe additional stamp duty?

Sorry - not questioning you but how would SDLT come to £6,600 in this instance? Also, if the annexe were not classed as a dwelling, would this not mean that we would only be purchasing the property as a whole and therefore be entitled to first time buyers relief as it is not actually 2 dwellings?

In all honesty, i cant see how even the main house can be considered as a dwelling in this case! Both the main house and the annexe require full renovation including all electrics/plumbing/heating etc and that is just the start of it!!!


My understanding is that as £1,840 is less than 1% of the total purchase price of £342,000, we would actually have to pay the minimum rate of relief (1%) on the purchase as a whole. Therefore, whereas the SDLT advisor has stated that SDLT due would be £7,760, assuming i'm not missing something, surely it would actually be 1% of the purchase price, so £3,420??
I would agree with your figures and method here, but only if you had a situation where the 3% surcharge did not apply. You have not said that one dwelling is worth at least 2/3 of the total, so I would expect the subsidiary dwelling test to be failed and the higher rates to apply. Using the on line calculator in the same way and then doubling it, you get to SDLT of £12,100.

In my opinion, the main house would be worth at least 2/3 of the total value. The annexe is an absolute bodge job - stairs in bathroom etc! Again, who would i ask to clarify the value of each part of the property? I think the estate agents would definitely value the main house at 2/3 or more of the total cost. Would we just need something in writing from them to state this? In this instance, if we were to convert into 1 property within 3 years, i guess we would have to pay additional SDLT?

The annexe currently has separate supplies to that of the main property for water/electricity/gas. We would intend to immediately put the annexe on the same supplies of water/gas/electricity as the main house. Assuming we do the works mentioned above, i.e. taking the 1st floor from the annexe and converting into the main property, AND, also putting the remaining ground floor of the annexe on the same water/gas/electricity system as the main house, would it still be classed as "capable for use as a single dwelling" ? Perhaps not. All the factors need to be weighed up. You have not mentioned permitted planning use nor whether there has been a history of separate use of the two parts. Are utilities billed separately to the two parts?

I believe there must be a history of separate use of the 2 parts. Something we would not be able to prove either way?

I am inclined to think that it wouldnt have had planning permission to be used as a separate dwelling. Our understanding is that it has only ever been used by the family who lived there so wouldnt have been rented out. You can see evidence of a doorway which once linked the 2 properties - i wonder whether they got planning permission for an extension to the original property then just blocked the doorway off! I will look into this tomorrow. Again, the fact that only 1 lot of council tax is paid and it is listed on the land registry as being just 1 property leads me to believe that it never had planning consent for use as a separate dwelling. Regarding utility bills - i dont know if they are billed separately but had assumed they would be considering they have separate supplies.

I really appreciate your advice on this matter. Cannot thank you enough!!

I am thinking that our best route would be to get someones expert opinion as to whether the annexe is suitable for use as a dwelling considering the state of it. It's just who we get to clarify this for us?! Just to be sure, can you please just clarify what SDLT we would be paying in this case and would there be any additional SDLT to pay if we turned into 1 property. And would first time buyers relief be due considering we would only effectively be purchasing 1 property which is suitable for use as a dwelling.

Many thanks again, Matt.