SDLT and annex

r7otl

About to buy a house with annex (self contained, separate entrance, door in place to close it off from main house). Late in the day our solicitor has mentioned we might be eligible for multiple dwellings relief. Our solicitor has not covered themselves in glory hence a post here rather than simply ask them for clarification.

Obviously we’d like to save a few thousand pounds but what would the implications be in terms of mortgage provider? There is no separate deed for annex and it has been let out in the past.

As always thanks in advance for all your expert help.

RAS

2 x Council tax?

SDLT_Geek

Some lenders are not keen on properties with two kitchens or which might count as two separate dwellings.

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.  For example, is the door between the two parts lockable from either side?  Have the lettings been assured shorthold tenancies to unrelated people?  Or was it more temporary use like Airbnb?

There is HMRC guidance on whether a property counts as more than one dwelling starting here https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00410.

There is 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 which discusses the issues.

r7otl

SDLT_Geek said:

Some lenders are not keen on properties with two kitchens or which might count as two separate dwellings.

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.  For example, is the door between the two parts lockable from either side?  Have the lettings been assured shorthold tenancies to unrelated people?  Or was it more temporary use like Airbnb?

There is HMRC guidance on whether a property counts as more than one dwelling starting here https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00410.

There is 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 which discusses the issues.

Thanks but the first link does seem to work.

The annex was let out 20 years or more ago so I assume it must have been on an AST.

Assuming the property DOES qualify for multiple dwelling relief are there other implications? (such as 2 x council tax mentioned above). The lender (Nationwide) have already done their valuation and didn’t mention the annex at all. If it would cause problems in terms of mortgageability do we even need to bring up the issue?

r7otl

r7otl said:

SDLT_Geek said:

Some lenders are not keen on properties with two kitchens or which might count as two separate dwellings.

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.  For example, is the door between the two parts lockable from either side?  Have the lettings been assured shorthold tenancies to unrelated people?  Or was it more temporary use like Airbnb?

There is HMRC guidance on whether a property counts as more than one dwelling starting here https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00410.

There is 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 which discusses the issues.

Thanks but the first link does seem to work.

The annex was let out 20 years or more ago so I assume it must have been on an AST.

Assuming the property DOES qualify for multiple dwelling relief are there other implications? (such as 2 x council tax mentioned above). The lender (Nationwide) have already done their valuation and didn’t mention the annex at all. If it would cause problems in terms of mortgageability do we even need to bring up the issue?

Sorry, second link!

SDLT_Geek

r7otl said:

r7otl said:

SDLT_Geek said:

Some lenders are not keen on properties with two kitchens or which might count as two separate dwellings.

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.  For example, is the door between the two parts lockable from either side?  Have the lettings been assured shorthold tenancies to unrelated people?  Or was it more temporary use like Airbnb?

There is HMRC guidance on whether a property counts as more than one dwelling starting here https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00410.

There is 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 which discusses the issues.

Thanks but the first link does seem to work.

The annex was let out 20 years or more ago so I assume it must have been on an AST.

Assuming the property DOES qualify for multiple dwelling relief are there other implications? (such as 2 x council tax mentioned above). The lender (Nationwide) have already done their valuation and didn’t mention the annex at all. If it would cause problems in terms of mortgageability do we even need to bring up the issue?

Sorry, second link!

Try this link for the Fiander and Brower case: https://assets.publishing.service.gov.uk/media/60e585528fa8f50c7745818c/FIANDER_AND_BROWER_v_HMRC_Decision.pdf

SDLT_Geek

Assuming the property DOES qualify for multiple dwelling relief are there other implications? (such as 2 x council tax mentioned above). 

If the property does consist of two dwellings, then that could cause the extra 3% SDLT for additional properties to apply.  There are rules which help about "subsidiary dwellings" involving a 2/3 or more value test for the main dwelling and an "in the same building" or "in the grounds" test for the annexe.

r7otl

SDLT_Geek said:

Assuming the property DOES qualify for multiple dwelling relief are there other implications? (such as 2 x council tax mentioned above). 

If the property does consist of two dwellings, then that could cause the extra 3% SDLT for additional properties to apply.  There are rules which help about "subsidiary dwellings" involving a 2/3 or more value test for the main dwelling and an "in the same building" or "in the grounds" test for the annexe.

It would seem we won’t have to pay extra 3% AND annex meets HMRC criteria as ‘separate dwelling’ so only concern is how Nationwide might view things; as mentioned earlier they’ve already done their valuation.

Would they even know if we did/didn’t claim MDR?