The Upper Tribunal has confirmed a major unfairness in the Stamp Duty Land Tax (SDLT) rules. If you have submitted a return on the basis that properties are non-residential and subsequently the subject matter is confirmed residential property, there is no mechanism to go back and claim Multiple Dwelling Relief (MDR) after the 12-month return amendment period.

  • In HMRC v Daniel Ridgway [2024] UKUT 00036, the appellant purchased a property for £.6.5m. It comprised two separate registered titles: a semi-detached house and gardens, and a second property on adjoining land and a building known as the Old Summer House with separate access.
  • The Old Summer House had originally been used as a garage and later as an artist’s studio.
  • Mr Ridgway's solicitor advice that if the Old Summer House was in commercial use at the date of completion then 'mixed-use relief” resulted in a lower rate of SDLT applying.
  • He was also advised that if there was no commercial use, then Multiple Dwellings Relief could be claimed.
  • Two weeks before completion, at the instigation of Mr Ridgway, the vendors granted a commercial lease of the Old Summer House for a term of six months to a photographic studio business. The lease contained a covenant that the Old Summer House should not be used for residential purposes.
  • Mr Ridgway submitted a land transaction return claiming that the properties were in mixed-use at acquisition.
  • SDLT of £314,500 was paid at the lower Non-residential rate. If SDLT had been paid at the residential rate it would have amounted to £888,750. With the benefit of multiple dwellings relief, the SDLT would have amounted to £577,500.
  • HMRC opened an enquiry and denied the claim.

On appeal to the First Tier Tribunal (FTT), the mixed-use claim was denied as the FTT found that the Summer House was in fact 'suitable for use as a dwelling'. Further, off its own back (as this has not been argued by HMRC), it decided that the act of the buyer in asking the seller to grant to commercial lease in respect of the Summer House brought the case into the SDLT anti-avoidance provisions of s.75A. Therefore the residential rate applied. The FTT then also allowed a late claim for Multiple Dwelling Relief (MDR). 

By the time of the FTT hearing, the appellant was too late to amend his SDLT return to claim MDR. 

HMRC objected to the FTT findings and the allowance of MDR,and Mr Ridgway, who had been unrepresented before the FTT, engaged a barrister and both parties made an appeal to the Upper Tribunal (UT). Mr Ridgway argued that the FTT was wrong to find that the Old Summer House was residential.

The UT decided that the FTT:

  • Was correct in finding that the Old Summer House was 'Suitable for use as a dwelling', as despite the restriction against residential use imposed by the commercial lease.
  • Had failed to review the past planning history and the property: it came with planning permission as a residential property.
  • Not noted that Old Summer House had residential use already, it would require a change of use if it were to be used commercially.
  • Was wildly incorrect in its application of the anti-avoidance provision. The amount of purchase consideration was the only amount of consideration paid and received and as such there was no 'notional transaction' or manipulation that would allow s.75A to bite.

The UT remade the FTT's decision, still finding that the Old Summer House was a dwelling.

The appellant's final ground of appeal was then on the availability of MDR. This arose in the case effectively as a late claim.

The UT found that there was no mistake in submitting the original return and there was no scope for Overpayment relief:

  • The relevant facts were known to Mr Ridgway at the time he made his return.
  • He made an error in concluding that the Property was non-residential property.
  • Section 58D(2): Transfers involving multiple dwellings is clear that relief 'must' be claimed in a return or an amended return.
  • The absence of any provision for Mr Ridgway to make a claim out of time or during an enquiry is consistent with the benefit of certainty and finality referred to by the Court of Appeal in 'Candy', which said: "SDLT is a self-assessed tax which imposes hard-edged deadlines. Where a relief requires a claim and a claim is not made in accordance with any procedural requirements, the taxpayer will not be entitled to relief."

[Editorial note: Top tip: once a dwelling always a dwelling? Do some research and check the planning history of a building before attempting to change its use for SDLT.]

Useful guides on this topic

SDLT: Stamp Duty Land Tax, start here
What is SDLT? What are the SDLT rates? What is exempt from SDLT? What reliefs are available? When are returns due? When can you amend a return?

SDLT: Multiple Dwellings Relief (MDR)
What is Multiple Dwellings Relief (MDR) for Stamp Duty Land Tax purposes? When does it apply and how is it claimed?

Different ways of taxing UK property
This guide summarises the different ways of taxing income and gains in respect of the exploitation of UK property.

Land & Property: Dwellings
What is a dwelling for VAT purposes? What is the VAT treatment for construction, conversion, sale, and letting of a dwelling?

Overpayment Relief
What is Overpayment Relief? When can you claim Overpayment Relief? What are the conditions for a claim for Overpayment Relief? What are the time limits for a claim for Overpayment Relief?

External links

HMRC v Daniel Ridgway [2024] UKUT 00036 (TCC)