Advice on whether to claim SDLT Multi Dwelling Relief

TTM

HI all,

My wife and I are in the process of buying a house and our solicitor has flagged that it may be possible to claim MDR.  This isn't something I'd ever heard of before and having spent a couple of days reading and researching, I'm still a little unsure.

The house in question was listed as a 3 bed semi with a 1 bed self contained annexe that is currently open to the main part of the house via a lockable door, but could easily be made totally separate.

The annexe comprises of a living room, bedroom, bathroom and kitchen.  It has it's own front door to the outside, as well as it's own services (gas boiler, electrics, not sure about water though).  In the past it's been rented out I believe and is now used by the vendors as a flat for the husband who has mobility issues and is unable to use the main part of the house.

Our plan is to use the annexe as a work space for now, as we both work from home, and a granny flat in the future in case my wife's mother needs somewhere to live once her house becomes too much for her to manage.

Everything I've read makes it sound like this meets the criteria for MDR, though I have also read that having a distinct postal address and being registered for separate council tax can be helpful, neither of which I believe are in place.

Our solicitor has asked us to make a decision as to whether we'd like them to apply this relief and I'm hoping for some advice from anyone with experience of going through this process.

I do have some outstanding questions -

I know it's self assessment, but what's the process in terms of HMRC deciding whether the property qualifies or not and how long does this take?  Can we ask HMRC proactively if it qualifies before claiming?

Could we simply apply the relief after confirming to the best of our knowledge that it should apply and put the saved SDLT in a savings account in case HMRC claim it back further down the line? Again, how long for?

What are the downsides to this?  Penalties?  Interest?

Many thanks in advance

jonnydeppiwish!

What does your solicitor advise? After all, they’re the ones you are paying for legal advice from…..

TTM

They have said it appears that the property does qualify, but as it’s self assessment the responsibility is on us to research and decide. 

user1977

TTM said:

They have said it appears that the property does qualify, but as it’s self assessment the responsibility is on us to research and decide. 

Eh? Self-assessment doesn't mean you can't seek professional advice - I presume they're just not wanting to give any real advice about it.

SDLT_Geek

TTM said:

HI all,

My wife and I are in the process of buying a house and our solicitor has flagged that it may be possible to claim MDR.  This isn't something I'd ever heard of before and having spent a couple of days reading and researching, I'm still a little unsure.

The house in question was listed as a 3 bed semi with a 1 bed self contained annexe that is currently open to the main part of the house via a lockable door, but could easily be made totally separate.

The annexe comprises of a living room, bedroom, bathroom and kitchen.  It has it's own front door to the outside, as well as it's own services (gas boiler, electrics, not sure about water though).  In the past it's been rented out I believe and is now used by the vendors as a flat for the husband who has mobility issues and is unable to use the main part of the house.

Our plan is to use the annexe as a work space for now, as we both work from home, and a granny flat in the future in case my wife's mother needs somewhere to live once her house becomes too much for her to manage.

Everything I've read makes it sound like this meets the criteria for MDR, though I have also read that having a distinct postal address and being registered for separate council tax can be helpful, neither of which I believe are in place.

Our solicitor has asked us to make a decision as to whether we'd like them to apply this relief and I'm hoping for some advice from anyone with experience of going through this process.

I do have some outstanding questions -

I know it's self assessment, but what's the process in terms of HMRC deciding whether the property qualifies or not and how long does this take?  Can we ask HMRC proactively if it qualifies before claiming?

Could we simply apply the relief after confirming to the best of our knowledge that it should apply and put the saved SDLT in a savings account in case HMRC claim it back further down the line? Again, how long for?

What are the downsides to this?  Penalties?  Interest?

Many thanks in advance

This is likely to be one you need professional advice on, but if you want to do some initial research on it yourself, you could start with the HMRC Guidance in the Manual:

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00410

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00415

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00420

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00425

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00430

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm29955

There are lots of decided cases on the issue.  Perhaps the two most significant are the Upper Tribunal decision in Fiander and Brower https://assets.publishing.service.gov.uk/media/60e585528fa8f50c7745818c/FIANDER_AND_BROWER_v_HMRC_Decision.pdf

and the most recent First Tier Tribunal case of Dower: 

https://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j12450/TC%2008497.pdf

HMRC will not give an advance ruling on a matter so fact dependant, but do enquire into many returns claiming MDR as it is an area of concern, there is a press release about it here: https://www.gov.uk/government/news/new-homeowners-warned-over-tax-refund-claims  This warns about the risk of penalties for incorrect returns.