Jonathan Ralph v The Commissioners for HMRC
[2023] UKFTT 901 (TC)
Yisroel Dreyfus v The Commissioners for HMRC
21 March 2024
[2024] UKFTT 244 (TC)
First-tier Tribunal
Someone tried to get a tax break (MDR) because they converted a garage into a second apartment. The tax court said no, because the apartment wasn't really finished and still depended on the main house for things like water and electricity. They needed to show it was a separate, usable apartment on the day they bought the property.
Key Facts
- •Appeal against a closure notice for £74,750.00 in Stamp Duty Land Tax (SDLT) due to a dispute over Multiple Dwellings Relief (MDR).
- •Appellant claimed MDR for a property with a converted garage (annex) which he argued constituted a second dwelling.
- •Works to convert the garage were carried out between contract exchange (June 7, 2021) and completion (June 22, 2021), but were not fully finished at the time of completion.
- •The annex lacked a fully independent kitchen, bathroom, separate utility meters, postal address, and clear evidence of lockable internal doors.
- •Appellant's representative was unable to provide convincing evidence supporting claims during the hearing.
- •HMRC argued that the annex was not a separate dwelling due to lack of independence and insufficient physical manifestation of a separate dwelling at the time of completion.
Legal Principles
Multiple Dwellings Relief (MDR) is applicable if the main subject-matter of a transaction consists of an interest in at least two dwellings, with a dwelling being defined as a building or part of a building used or suitable for use as a single dwelling, or in the process of being constructed or adapted for such use.
Paragraph 2(2), Paragraph 7(1) and (2) of Schedule 6B, FA 2003
For a building to be 'in the process of being constructed or adapted' for use as a single dwelling, there must be some physical manifestation of the dwelling at the time of completion.
Ladson Preston (1) and Aka Developments Greenview Ltd (2) and The Commissioners for His Majesty’s Revenue and Customs [2022] UKUT 00301 (TCC); Keith Fiander and Samantha Brower v The Commissioners for Her Majesty’s Revenue and Customs [2022] UKUT 0156 (TCC)
An objective assessment of all relevant factors should be made from the perspective of a reasonable objective observer, observing the physical attributes of the property at the time of completion.
Jonathan Ralph v The Commissioners for Her Majesty’s Revenue and Customs [2023] UKFTT 901 (TC)
Key factors to consider for determining if a building is suitable for use as a single dwelling include basic living facilities, independent entrances, and privacy, and separate utility meters, postal address, and council tax billing are reliable indicators of separate dwellings.
HMRC guidance SDLTM00420 and SDLTM00430; Jonathan Ralph v The Commissioners for Her Majesty’s Revenue and Customs [2023] UKFTT 901 (TC)
Outcomes
Appeal dismissed.
The Tribunal found insufficient evidence to demonstrate that the annex was a separate dwelling at the time of completion. The work undertaken was minimal, leaving significant features of a separate dwelling absent, including independent utility meters, a functional kitchen, a lockable door, and a separate postal address. The annex remained reliant on the main house for utilities and lacked key features needed for independent living.