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Light spacious basement area with staircase

SDLT: Basement was not a separate dwelling


Taxpayers failed to prove that the basement annex was a separate dwelling to the main house, and as a result was not entitled to multiple dwellings relief (MDR).

18th Sep 2020
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The amended land transaction return included the MDR claim had been submitted late. HMRC treated the amended return as being made on time.

The purchase

In March 2016 Mr Merchant and Ms Gater jointly purchased a residential property for £1.92m, the land tax return was submitted on the same day as completion and stamp duty land tax of £144,150 was paid on time.

The terraced property consisted of the main house and an annex. The annex comprised of a kitchen, shower room, living room and bathroom. The annex can be accessed through the main dwelling’s front door and along a common hallway to a staircase leading to the basement.

The annex did not have any of the following: a separate title number, council tax billing, postal address, gas and electric meters. The annex did have a separate zone for the alarm system.


In April 2017, after speaking to another adviser, a request was made on behalf of the taxpayers to amend the land tax return claiming MDR for the main house and annex. Within the letter a request was made for a refund of £64,650. In May 2017, a further letter was submitted to HMRC enclosing documents concerning the property which had not been enclosed in the April correspondence.

In January 2018, HMRC raised an enquiry into the amended land tax return, and after some correspondence it issued a closure notice rejecting the MDR claim. Following a review in January 2019 the taxpayers appealed to the first-tier tribunal (TC07783).

What is MDR?

Multiple dwellings relief is available where the main subject matter of a transaction contains at least two dwellings, bought either in a single transaction or as part of a linked transaction. 

Where the relief is available, SDLT is calculated on the average price of the dwellings, rather than in respect of the actual value of each dwelling. The relief could result in the purchaser paying lower rates of SDLT.

Timescale for amending SDLT returns

An amendment would need to be made within 12 months of the filing deadline. Minor changes, for example wrong title number can be made over the phone. Any substantial changes would need to be made in writing supported with reasons for the new return and a copy of the contract.

Returns can be amended after HMRC has started a compliance check. This case also demonstrates that HMRC do have the discretion to accept late amendments.

The dispute

The Judge needed to establish whether the amended return was made within the 12-month window and if the amendment had been made in May 2017 (outside of 12 months) and accepted by HMRC, whether the enquiry and closure notice had been made on time and therefore valid.

If the amendment and enquiry into the return were accepted and valid, the Judge needed to consider whether the taxpayer was entitled to claim MDR.

The outcome

The Judge found that the amendment to the SDLT return could not have been made before May 2017 as this was when the supporting documents were provided. The enquiry into the amended return demonstrated that HMRC treated the amendment as being made on time and valid.

As a result, the enquiry into the return was made within nine months of the amendment and as such also valid. The Judge found the closure notice to be valid, even though no conclusion had been included. This was on the basis that the closure notice was ‘substantially in conformity’ with the legislation and all previous correspondences from HMRC suggested that MDR was to be denied.

The Judge made reference to the Fiander & Anor V HMRC case as there were a number of similarities. Whilst that case was a first-tier tribunal decision and is not binding, it was appropriate to adopt a similar reasoning. It was found that MDR is not available as the annex formed part of the main house rather than a separate dwelling.

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