Should multiple dwellings relief have been claimed?

“We had a client who purchased a property last year come back to us recently and say that they had been contacted by a firm of solicitors who had a way of reducing the SDLT payment the client made on purchase. Not giving us any details we found online the stories of firms making these claims which were using a loop hole, which whilst initially successful, often resulted in the refund being reclaimed. We suggested that the client speak to HMRC to check the legitimacy of the scheme, and suggested they review the information online from people who had used these schemes. The next we heard the client was going ahead with one of these firms, and we advised that whilst we would supply the client with copy documents, we wouldn’t correspond direct with the firm as we didn’t want to be caught up in any potentially fraudulent transaction – the client did not mention that HMRC had confirmed it was a legitimate claim.

We have received a letter today from the client saying that they successfully claimed a large sum back from HMRC under the Multiple Dwelling relief section, as the property had a detached annex with a covered veranda with a kitchen in it. The agent’s details described it as being suitable for guests, a gym, an office, and we were led to believe during the transaction that the client was going to use it as an office.

They are now stating that they wish to claim over £3,000 to cover the costs of the firm which made the claim on their behalf. We will obviously have to notify insurers, but what concerns me is:

1. Is it our responsibility to be aware of these loop holes?

2. Are we right that the client chose to engage the services of this company, and they agreed to the cost. If their intention was to expect us to pay the costs then we should have been given the opportunity to agree costs – from the sound of it there was nothing really other than ask HMRC to amend the SDLT form to claim back the relief, not worth £3,000 in fees at all and would have been something we could have done had we been made aware that HMRC had confirmed to the client they had a valid claim.”

Source: BLG Member

 


Multiple dwellings relief* is not a loophole, it is a relief which is, unfortunately, often overlooked. I have been contacted by several people who have been targeted by an accountancy firm suggesting that they could have made a claim in cases where it had not been done. The process itself is fairly simple in most cases and, as you say, involves filing an amended SDLT1 together with supporting documentation.

To answer your specific questions:

1. As a property lawyer you should be aware of the structure of SDLT which includes the reliefs.

2. I am not a litigation specialist but I would have expected the client to give you the opportunity to put matters right before engaging the third party.

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.

For more guidance on SDLT please see Ann’s Stamp Duty Land Tax Q&As. This free resource covers a wide range of queries and using the SDLT tags you can filter the results to find a specific query.

To be notified when new Q&As are published please sign up for alerts here.