SDLT on property with an "annex"

NewToThis2024

Hi all. We are in the process of buying a house and we have discovered that it is classed as having an annex (2 council tax bandings). This is debatable in itself as it's only got 1 kitchen with the other converted to a utility (no cookers), but that's where we are at.

I believe it's all on one single title and I think both units are on the same meters, so it's just the council tax.l as far as I am aware.

I believe there are 2 parts to this question, the first is whether the 3% surcharge would be due. I believe it's not due where the annex is on the same grounds as the primary property (which is the case), but then it also has to be less than 1/3rd of the total value of the whole transaction. I have no idea how that would be valued? Is it self certified?

The second question would be on multi dwelling relief (which I know is being closed from June 1st). We could potentially look at claiming this but after purchasing we want to reincorporate the annex into the main house and get the VOA to put it all back onto 1 council tax band. Does this matter at all? Would the relief have to be paid back at that point anyway?

Thanks in advance for any input.

NewToThis2024

@SDLT_Geek

SDLT_Geek

NewToThis2024 said:

Hi all. We are in the process of buying a house and we have discovered that it is classed as having an annex (2 council tax bandings). This is debatable in itself as it's only got 1 kitchen with the other converted to a utility (no cookers), but that's where we are at.

I believe it's all on one single title and I think both units are on the same meters, so it's just the council tax.l as far as I am aware.

I believe there are 2 parts to this question, the first is whether the 3% surcharge would be due. I believe it's not due where the annex is on the same grounds as the primary property (which is the case), but then it also has to be less than 1/3rd of the total value of the whole transaction. I have no idea how that would be valued? Is it self certified?

The second question would be on multi dwelling relief (which I know is being closed from June 1st). We could potentially look at claiming this but after purchasing we want to reincorporate the annex into the main house and get the VOA to put it all back onto 1 council tax band. Does this matter at all? Would the relief have to be paid back at that point anyway?

Thanks in advance for any input.

Even if the property qualifies for multiple dwellings relief, the relief would be withdrawn if, within three years, the two dwellings are turned back into one.

As you say, if the property counts as two dwellings, there is a risk of the 3% extra SDLT applying.  A number of conditions would have to be met if that is to be escaped. 

• As you say, the annexe would have to be worth less than 1/3 of the whole.  It would be up to the taxpayer to self-assess this and to be able to evidence it if needed.
• There would be other complications if you still own another property when this house is bought.

NewToThis2024

Thanks for that, we wouldn't own another property. How would one reasonably argue the less than 1/3rd value point?

In sqm terms the annex makes up approx 25% of the total internal area. There is then a large rear garden and a front driveway, would they be considered as part of the main dwelling only? The annex does have access to both areas.

Would that be sufficient "evidence"?

NewToThis2024

Also to add, is 2 dwellings the same as a self contained unit within larger dwelling? When the annex was built there was a planning condition that it couldn't be split into 2 dwellings.

SDLT_Geek

NewToThis2024 said:

Also to add, is 2 dwellings the same as a self contained unit within larger dwelling?

Not always, for example a unit which is access through the living accommodation of the larger part can have its own council tax band, but there is likely only one dwelling for SDLT purposes.

 When the annex was built there was a planning condition that it couldn't be split into 2 dwellings.

The planning condition is a factor against the annex being a separate dwelling.