Stamp duty query re annexe

verytired11

The property I am buying includes a garage converted into a small annexe.  My lawyers have said I should seek separate advice on this about higher rate stamp duty.  Having had a quick google it seems that if an annexe is part of the grounds of the main residence and is worth a third or less of the overall purchase price, it will not attract higher rate stamp duty.  This would apply to my case. However, the articles also seem to say this is very complex and advice should be sought.  It's not clear whether it's automatically exempt or whether I have to apply for multiple dwellings relief.  Any advice would be helpful before I shell out for separate tax advice.

verytired11

Anyone got any thoughts?  

RAS

@SDLT_Geek

Strummer22

https://www.blakemorgan.co.uk/additional-3-stamp-duty-land-tax-surcharge-on-granny-flats-and-other-dwellings/

Example 4:

"Under the amended rules it is possible for someone to buy in a single transaction a property which counts as two dwellings and not pay the surcharge. For this to be the case, the following subsidiary dwelling test is applied:

• the less valuable dwelling must be a part of the same building as the more valuable one (or in the grounds of the more valuable one)
• the more valuable property must be 2/3 or more of the value (so over £533,333 in the case of a purchase for £800,000).

For the surcharge not to be due, the property might be the buyer’s only property, or he might be replacing an only or main residence by moving into the more valuable of the two dwellings being bought.

On the face of it, the SDLT in this example would be the same as in example 1 above; £30,000.

As MDR can be claimed without incurring the surcharge, the SDLT is £20,000 calculated as follows:

2 x £10,000 (£10,000 being the SDLT on the average price of £400,000 without the surcharge)."

Based on this, you don't have to claim MDR in order to avoid paying the 3% surcharge. However, it would save you money to claim MDR if the annexe meets the other rules for counting as a dwelling, i.e., has its own lockable door, somewhere to sleep, wash, toilet and make meals. E.g. a microwave on a bedside table won't count as a kitchen.

SDLT_Geek

Multiple dwellings relief is available only if the annexe is sufficiently self contained that an unrelated household could live in it as their long term home with a sufficient degree of privacy and security. 

There is HMRC guidance on it starting here https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00410 and an Upper Tier Tribunal decision here https://www.gov.uk/tax-and-chancery-tribunal-decisions/keith-fiander-and-samantha-brower-v-the-commissioners-for-hm-revenue-and-customs-2021-ukut-0156-tcc discusses the issues. 
Edit: this might be a better link to the Fiander and Brower case: https://assets.publishing.service.gov.uk/media/60e585528fa8f50c7745818c/FIANDER_AND_BROWER_v_HMRC_Decision.pdf

It is only if there are two dwellings that you have to consider the 2/3 value test and the "in the grounds" test for subsidiary dwellings.

verytired11

@Stu_N_ @SDLT_Geek oh wow thanks that's really helpful. So it looks as if not only am I not liable for the surcharge, but I might actually be able to save some stamp duty if eligible for multiple dwellings relief?  I will definitely look further into this.....