In a recent legal twist, Jonathan Ralph, an executive at a wealth management firm, faced a stamp duty setback concerning his £3.3m Derbyshire mansion. The dispute, triggered by HMRC’s investigation eight months after Ralph’s initial SDLT calculation, centred around the eligibility for Multiple Dwellings Relief (MDR).
Ralph’s intention to reside in an annexe during main house renovations became a focal point. However, in April 2022, HMRC concluded that he did not qualify for MDR, demanding an additional £101,250 and increasing the total Stamp Duty Land Tax (SDLT) to £294,750.
The Suitability Debate
Ralph’s appeal, grounded in Finance Act 2003, focused on the suitability of the annexe as a single dwelling. The argument revolved around whether the annexe was ‘used or suitable for use as a single dwelling’ and whether it was ‘in the process of being adapted for such use’ at the transaction date.
Tax barrister Patrick Cannon emphasised the term ‘suitable,’ asserting that the property must be inherently appropriate for use as a single dwelling, not merely capable of adaptation. In contrast, HMRC contended that basic living needs could be met to a reasonable standard, even if adaptations were pending.
Conclusion
Despite Ralph’s explanation of pandemic-related constraints and fitter availability, the tribunal rejected the appeal, citing the delay in initiating renovation works as the primary reason. This case underscores the importance of grasping MDR nuances, interpreting terms like ‘suitable’ and recognising external factors’ impact, such as the COVID-19 pandemic, on property transactions.
Just as Ralph, if you’re having trouble regarding any MDR or SDLT related issues, seeking professional advice is probably the way to go.
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