SDLT Reclaim Opportunities; multiple and additional Dwellings

25 August 2020

The complex SDLT rules provide numerous opportunities for obtaining refunds from HMRC paid as a result of incorrect advice on commonly misunderstood legislation.

One such opportunity for reducing the liability that’s often missed, relates to the SDLT payable on the purchase of residential properties which include a granny flat or annexe building.


Revisiting a recent SDLT client case:

The clients in question had purchased a large house with a separate ‘granny annexe’ building in the grounds. The annexe was fully equipped with a kitchen, bathroom and a bedroom together with fully working utility supplies – it was even registered separately for council tax. At the time of completion of their new property, the clients hadn’t yet disposed of their previous main residence so, quite correctly, they were advised that the higher rates of SDLT for additional dwellings applied to their purchase.

One important point had been overlooked in the calculation – the presence of the annexe, an entirely separate dwelling, being purchased in the same transaction, and the availability of Multiple Dwellings Relief (MDR). The rules provide a relief under MDR where multiple dwellings are being purchased in the same transaction, so that SDLT is calculated for each dwelling individually based on the average price of the dwellings, each amount of SDLT calculated is then added together to give the total SDLT liability. This is opposed to a single SDLT calculation being undertaken for the aggregated consideration being given for all the dwellings. The net effect is more about the consideration falling into the 0% and 2% bands, resulting in a significantly lower liability.

An understandable point raised in relation to this relief in these circumstances is that ‘if you’re buying multiple dwellings, then surely the higher SDLT rates for additional dwellings would then apply to the purchase, regardless of whether it is replacing the main residence?’ – the answer to this is no, where the purchase involves the acquisition of the main house and an annexe, which technically are separate dwellings, then the provisions allow the purchase to be treated as a purchase of multiple dwellings for the purpose of MDR, but only the purchase of a single property for the purpose of the higher rates of SDLT applied to additional dwellings, meaning MDR can be applied, but the additional 3% SDLT rates are not used.

We advised the clients of this opportunity, and then subsequently assisted them with obtaining the refunds due – firstly the refund due following the sale of the previous main residence, and then subsequently the refund on applying MDR. In total, we obtained refunds for the clients of £37,750.

 

We regularly advise clients and solicitors on the correct application of SDLT. So, if any of your clients require advice on the increasingly complex SDLT provisions which apply to everyday transactions, please get in touch.

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