What is a subsidiary dwelling for the purposes of the 3% surcharge?

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“I have issue with SDLT and relief on multiple dwellings.

The main issue is what constitutes an additional dwelling, so would be eligible for the relief? In our example, the annexe is detached from the main building, and appears to have been built as a studio, with a bathroom and later shower/steam room. However, the only mention of a kitchen is an outside space with a worktop, sink and fridge, under a veranda so clearly can’t be used year round, and has no cooking facilities.

Does the unit not have to have a permanent kitchen to be classed as a dwelling?

It seems that anyone who purchases a property with any structure in the garden could claim the relief if they want to state it’s a dwelling, but is that correct?

What are the risks of getting it wrong? For example, if we processed a case and advised the client they could get the relief, but in three years’ time HMRC come back and say it didn’t because of a misinterpretation, and want the funds, would that make us liable? I assume we would have to get the client to sign some form of disclaimer that they are instructing us to claim the relief as their agent only.

Having spoken to a number of firms, none of which were aware of this (one had just received a letter from a client with exactly the same issue, by coincidence), it seems that this is something generally overlooked in training, CPDs etc.

Also, if a client did claim relief under multiple dwellings, does that now mean that on completion they will own two properties and have to pay the 3% extra?”

Source: BLG Member


I have set out my thoughts on your query below. You are correct that multiple dwellings relief (‘MDR’)* is often overlooked.

There is no definition of ‘dwelling’ as such for the purposes of MDR but a building or part of a building ‘counts as’ a dwelling if, on the day of completion:

(a) it is used or suitable for use as a single dwelling; or

(b) it is in the process of being constructed or adapted for such use

(paragraph 7(2) Schedule 6B FA 2003).

Land that is, or is to be, occupied or enjoyed with the dwelling such as a garden or grounds (including any building or structure on such land) and land that subsists, or is to subsist, for the benefit of the dwelling, is taken to be part of the dwelling. This appears to deem buildings in the grounds of a dwelling to be part of that dwelling where they are used, occupied or enjoyed with the dwelling.

Whether a building or part of a building is ‘used or suitable for use as a single dwelling’ will be 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. The HMRC guidance on the 3% surcharge on the purchase of additional dwellings (which uses the same wording) says:

‘“Dwelling” takes its everyday meaning; that is a building, or a part of a building that affords those who use it the facilities required for day-to-day private domestic existence.’

If the annexe had no cooking facilities whatsoever my view would be that it was not a dwelling for the purposes of MDR. Cooking facilities (even if rudimentary) would probably make me conclude that it was a dwelling unless there was something which made the annexe unsuitable for living in.

In cases where matters are not clear-cut I would advise you to write to HMRC on behalf of the client and get their view. Where appropriate MDR can be claimed later by amending the SDLT return within 12 months of the filing date. This is quite a simple process.

If the client claims MDR they will be liable for the 3% surcharge on both dwellings (irrespective of whether the individual owns an interest in another dwelling at the end of the day or whether one of the purchased dwellings replaces a main residence) unless the annexe is ‘subsidiary’ to the other dwelling purchased in the same transaction or is worth less than £40,000.

To be ‘subsidiary’ to another dwelling (the ‘main dwelling’):

(1) the dwelling must be situated within the grounds of or within the same building as the main dwelling; and

(2) the amount of the total chargeable consideration for the transaction which is attributable, on a ‘just and reasonable’ basis, to the main dwelling must be at least two-thirds of the chargeable consideration attributable to the main dwelling and any other dwelling situated as in (1) above and forming part of that transaction.

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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