Judgment summary
This appeal concerned Stamp Duty Land Tax and whether the Appellant, John Smith, was entitled to Multiple Dwellings Relief (MDR) on his purchase of Huntbourne, a property in Tenterden, on 14 December 2023 for £2,600,000 (paras 3-4).
The Appellant argued that Huntbourne comprised two dwellings, the Main House and a separate building referred to as the Annexe, so that MDR applied under paragraph 2(2) Schedule 6B Finance Act 2003. HMRC rejected the claim by closure notice dated 21 February 2025, taking the view that Huntbourne was a single dwelling (para 4).
If the Appellant were correct, SDLT due would be £220,500; if HMRC were correct, SDLT due would be £301,250, a difference of £80,750 (para 5).
The Tribunal held that MDR was not available because the Annexe was not suitable for use as a single dwelling at the time of completion, and dismissed the appeal (paras 6, 57-58).
Background
Huntbourne is a property of approximately 3 acres near Tenterden, Kent, comprising a Main House and a separate single storey building known as the Annexe, previously described as a 'pool house' in the sales brochure (paras 25, 29(3)).
The Appellant purchased Huntbourne on 14 December 2023 for £2,600,000 and filed an SDLT return on 18 December 2023, subsequently claiming MDR on the basis that the property comprised two dwellings (paras 3-4).
HMRC issued a closure notice on 21 February 2025 rejecting the MDR claim on the basis that Huntbourne was a single dwelling (para 4). Huntbourne is registered under a single Land Registry title (para 26).
Core dispute
The issue was whether the Appellant was entitled to MDR under paragraph 2(2) Schedule 6B Finance Act 2003, in reliance on paragraph 7(2)(a) of that Schedule, which required determining whether the Annexe was used or suitable for use as a single dwelling (para 19).
The burden of proof rested on the Appellant, to be discharged on the balance of probabilities (paras 20-21).
The Appellant argued the Annexe provided facilities for basic domestic needs together with sufficient privacy and security, including a kitchen, shower and lavatory, independent heating, its own oil supply and fuse box, a separate driveway, lockable doors, and physical separation from the Main House by around 200 feet and a stream (para 33).
HMRC's main points were that the Annexe did not provide sufficient space to meet basic living needs, did not provide sufficient privacy and security, and shared its electricity meter, water meter, council tax rating and postal address with the Main House (para 34).
Court findings
The Tribunal found that the Main House was agreed to be suitable for use as a single dwelling, but the Annexe was not being used as a single dwelling at the time of completion (paras 27-28).
Applying the multi-factorial test from Fiander and Brower v HMRC [2021] UKUT 0156, the Tribunal assessed suitability as at the effective date of completion, in line with Ladson Preston Limited v HMRC [2022] UKUT 301 (paras 17, 36-37).
The Tribunal found the Annexe contained sufficient facilities to meet basic domestic living needs, including sleeping space, a private toilet, washbasin and shower, and facilities to prepare, consume and clean up food, and that there was sufficient storage space in the sauna room for personal effects (paras 31-32, 39-41). This was a material factor pointing towards MDR being available (para 42).
However, the Tribunal was not satisfied that there were objectively realistic terms of occupancy that would preserve sufficient privacy and security consistent with the concept of a single dwelling, given the Annexe's direct proximity to the swimming pool shared with the Main House (paras 45-53). Neither of the Appellant's proposed occupancy arrangements, excluding the Main House occupiers from pool access or shared pool use, was found to be objectively realistic (paras 49-51). This was a material factor pointing against MDR being available (para 54).
The Tribunal gave limited weight to the shared council tax rating, postal address, electricity meter, water meter and single Land Registry title as factors weighing against single dwelling status, and limited weight to the Annexe's own heating system, stop-tap and fuse box as factors weighing in favour, finding neither set of factors determinative (paras 55-56).
Outcome
The Tribunal concluded that, on balance, applying the multifactorial test in Fiander, the Annexe did not have sufficient facilities to meet, for occupiers generally, basic living needs with a degree of privacy, self-sufficiency and security consistent with the concept of a single dwelling, relying particularly on the privacy and security findings (para 57).
The Tribunal held that the Annexe was not suitable for use as a single dwelling under paragraph 7(2)(a) Schedule 6B Finance Act 2003, so MDR was not available, and the appeal was dismissed (paras 57-58).
Major issues / areas of contention
- Whether the Annexe at Huntbourne was 'used or suitable for use as a single dwelling' under paragraph 7(2)(a) Schedule 6B Finance Act 2003
- Application of the multi-factorial test set out in Fiander and Brower v HMRC [2021] UKUT 0156
- Whether basic domestic living needs, including sleeping, hygiene and food preparation facilities, were met within the Annexe
- Whether the Annexe provided sufficient privacy and security given its proximity to a swimming pool shared with the Main House
- The relevance of objectively realistic terms of occupancy in assessing suitability for use as a single dwelling
- The weight to be given to shared council tax rating, postal address, electricity meter, water meter and a single Land Registry title
- The correct timing for assessing suitability, namely the effective date of completion, per Ladson Preston Limited v HMRC [2022] UKUT 301