Multiple Dwelling Relief on stamp duty with Annex

hampshirescott

Hi

looking for some help to make sure we are not barking up the wrong tree. About to buy a home which is a country cottage (large) which has a detached annex. It is listed as such in the estate agent info. It has its own completely separate entrance and front door. The annex consists of a bedroom, ensuite, separate bathroom, kitchen, and living room. The kitchen does not have a cooker but does have a microwave and a dishwasher and kitchen units and space for a fridge. 
It has its own heating controlled in the annex. It used to be used as a holiday let/B&B and has its own website still regarding this online. It does not have its own council tax band or address. 

The annex is less than 1/3 of the cost of the main house by quite some degree. It is all on the same land as the main house. 

We are buying the house and annex as our main residence. 

I phoned HMRC who seemed to think that would all be fine, but as usual, said it's a self-assessment process. Our lawyer I don't think has dealt with this before and is cautious. 

From my understanding, it seems pretty clear cut that we would be able to claim MDR without the 3% surcharge?

Am i missing somehting?

thanks

Mrcsmrs

Hi, we did this last year and successfully applied for the MDR discount. Our solicitor refused to accept that it was a legitimate use of the scheme however and so I called HMRC several times and sent them a detailed letter with plans of the entire property and where all the services were. Ours was technically more complex in that we were buying a second property and our solicitor was adamant that we were trying to commit tax fraud and get out of the surcharge for a second property but both could (and did) apply. 

The test appears to be as to whether a complete stranger could occupy the property or not, and if it would be theoretically possible to have the dwelling as a completely separate home. Nobody can answer this exactly for you but I did a lot of research into this and ours went through just fine despite my solicitor’s doubts. If you write to them with all the information I gave before you apply they’ll write back saying they can’t advise in detail but on the surface of it whether the application seems sound, they do just keep reiterating that it’s a self assessed tax. We kept the extra money back until after we’d had our return completed and knew it was okay. 

Since then we’ve had several letters from firms wanting to claim our excess stamp duty back for a fee but of course they don’t realise that the 3% surcharge applied to us. If you feel the property meets the criteria and you’re happy to put the leg work in by writing to them I think it’s worth doing. 

SDLT_Geek

hampshirescott said:

Hi

looking for some help to make sure we are not barking up the wrong tree. About to buy a home which is a country cottage (large) which has a detached annex. It is listed as such in the estate agent info. It has its own completely separate entrance and front door. The annex consists of a bedroom, ensuite, separate bathroom, kitchen, and living room. The kitchen does not have a cooker but does have a microwave and a dishwasher and kitchen units and space for a fridge. 
It has its own heating controlled in the annex. It used to be used as a holiday let/B&B and has its own website still regarding this online. It does not have its own council tax band or address. 

The annex is less than 1/3 of the cost of the main house by quite some degree. It is all on the same land as the main house. 

We are buying the house and annex as our main residence. 

I phoned HMRC who seemed to think that would all be fine, but as usual, said it's a self-assessment process. Our lawyer I don't think has dealt with this before and is cautious. 

From my understanding, it seems pretty clear cut that we would be able to claim MDR without the 3% surcharge?

Am i missing somehting?

thanks

You might want to look at the HMRC guidance on the issue starting here  https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00410 and perhaps look at some of the case law on it, including Fiander v Brower here: https://assets.publishing.service.gov.uk/media/60e585528fa8f50c7745818c/FIANDER_AND_BROWER_v_HMRC_Decision.pdf

hampshirescott

Hi

thanks, I have done that already regarding to the HMRC rules. I feel that we tick all the boxes, wanted to see if someone experienced can see something glaring that we might be missing?

Mrcsmrs

SDLT_Geek said

You might want to look at the HMRC guidance on the issue starting here  https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00410 and perhaps look at some of the case law on it, including Fiander v Brower here: https://assets.publishing.service.gov.uk/media/60e585528fa8f50c7745818c/FIANDER_AND_BROWER_v_HMRC_Decision.pdf

Thanks for sharing that, really useful to read, even though ours is done now! 

lincroft1710

hampshirescott said:

Hi

lhe annex consists of a bedroom, ensuite, separate bathroom, kitchen, and living room. The kitchen does not have a cooker but does have a microwave and a dishwasher and kitchen units and space for a fridge. 
It has its own heating controlled in the annex. It used to be used as a holiday let/B&B and has its own website still regarding this online. It does not have its own council tax band or address. 

If the annex was used as a holiday let. it probably should have have been assessed for non domestic rates. Otherwise it sounds as if it should have its own CT band.