What is the effect of a planning restriction on a claim for multiple dwellings relief?

I wonder if you could help me with the following query to do with Multiple Dwellings Relief (MDR) in connection with the purchase of a property for £4 million, which is separated into two dwellings, the main house plus a flat over a garage which has a separate access. The only issue here is that there is a condition on the planning consent that states that the flat over the garage cannot be used separately from the main house garage. Can you confirm that MDR will still apply?



In my view MDR* can be claimed although this view may be controversial.

The test for MDR is that the dwelling must be ‘used or suitable for use as a single dwelling’ not as a ‘separate’ dwelling so planning restrictions of the type you refer to are not determinative.

The test of ‘suitability’ for use as a single dwelling is a functional one and is a question of fact. Case law relating to the meaning of the term ‘dwelling house’ in certain of the Housing Acts has indicated that this covers premises which are suitable for all the major activities of residential life. Facilities must not be shared as the ‘dwelling’ must be self-contained.

HMRC are sending out enquiry letters which do not specifically ask about the planning permission but it may be alluded to in Q2 of the fairly standard letters I have seen. HMRC also seem to regard ‘separate’ and ‘single’ as interchangeable which is interesting.

At the time of publication this response was correct however as tax legislation and practice change from time-to-time you should take specific advice before taking any action.

* – Please note that multiple dwellings relief (‘MDR’) is abolished from 1 June 2024 unless contracts were exchanged on or before 6 March 2024 or are substantially performed before 1 June 2024.

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