Claims for stamp duty relief on annexes falling short

Homeowners that buy a property with an annex under the assumption they have purchased two properties and can therefore claim stamp duty relief may be left disappointed, according to Blick Rothenberg.  

The tax and advisory firm revealed that a tribunal last month ruled against two individuals appealing against HMRC’s decision to refuse to repay £10,000 of stamp duty.

Blick Rothenberg suggested this would likely “be the first of a number of tribunal decisions” and that reclaim companies frequently make unsolicited approaches to buyers of houses with annexes, offering to get stamp duty back for a success fee.

Partner at the firm, Sean Randall, suggested the taxpayers’ argument in this case was that the purchased property consisted of two dwellings – meaning that it qualified for partial stamp duty relief, or “multiple dwellings relief”.

He commented: “Although the property contained an annex and the annex had all the facilities reasonably required for separate living accommodation, it was connected with the main house internally by an open corridor. One of the ends of the corridor had ‘door jambs’ – the doorframe on which a door could be hung.
“The taxpayers argued that the work involved in hanging a door was merely remedial work and hence the absence of a door on the completion date could be ignored.”

They also argued that an intern door wasn’t needed to make the annex “suitable for use” as a single dwelling because the occupants of both parts of the property could be in a trusted relationship. The tribunal, however, rejected both arguments, and held that the property was suitable for use as one joined dwelling.

“This is likely to be the first of a number of tribunal decisions on multiple dwellings relief and annexes,” Randall added. “In the absence of narrower wording in the statute and the significant tax savings to be made, it is understandable that reclaim companies are testing where the boundary is.

“One wonders whether the decision would have been different in this case if the required work post completion would have involved reinstating a physical barrier between the two sides to the property rather than introducing a new physical barrier. It certainly shows that small details like this can have a big impact on tax.”

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