Nicole Behenna-Renton v HMRC TC/2024/01660
Date of Decision: 3 April 2025
This was a comprehensive win in an appeal about whether Multiple Dwelling Relief (MDR) applied to the Taxpayer’s purchase of a residential property which had an annex separated from the main dwelling by an internal door. The FTT considered the evidence provided by the Taxpayer along with our submissions and after weighing up all of the relevant factors rejected all of HMRC’s arguments.
Background
The property consisted of a main dwelling and an attached self-contained annex. The annex had all of the facilities and the physical configuration required to meet an occupiers basic needs, could control its own utilities and was separated from the main dwelling by an internal lockable door. The lock on the internal door was a thumb-turn lock, lockable from the annex side with a key and from the main dwelling side by the thumb-turn lock. At completion the door was locked and the Taxpayer was not provided with a key meaning that the door could not be opened.
What level of Privacy and Security is required?
HMRC’s main argument was in relation to privacy and security or the lack thereof, they argued that the lock on the internal door would allow an occupier of the main dwelling to enter the annex at will and vice versa. We argued that were the annex to be rented the Taxpayer (or landlord) would hold the key meaning that access to the main dwelling would be prevented and access to the annex by the keyholder would be in accordance with a tenancy agreement or the law.
When considering the privacy and security afforded by the lockable internal door the Tribunal followed the Upper Tribunal’s guidance in the case of of Fiander and Bower v HMRC [2021 UKUT 0156 and stated that:
“it is not necessary for there to be complete privacy and security, only that there is “a degree of privacy, self-sufficiency and security consistent with the concept of a single dwelling.”(Fiander [48](6))”
The Tribunal accepted our argument that a landlord would hold a key to the annex meaning that they would always be able to access the annex whether that was through an internal door or a separate external entrance.
HMRC made additional arguments in relation to privacy stating that the lack of curtains and blinds at completion meant there was nothing to prevent the occupier of the annex or main dwelling going up to the windows and looking in. The Tribunal did not agree and accepted our argument that curtains or blinds could be added after completion.
This is one of a number of recent decisions which reject HMRC’s assertions that there is a requirement for absolute privacy and security and allow for some reduction in privacy and security without preventing a finding that the annex was suitable for use as a single dwelling.
Lack of separate bills and postal address will not prevent MDR
The Tribunal also rejected HMRC’s arguments that the lack of separate utility bills, council tax and postal address prevented MDR and agreed that bills will often be included as part of the rent.
HMRC’s unreasonable approach
Of particular note in this case was HMRC’s unreasonable requirement that the Taxpayer should have taken photographs of the annex to include the lockable door and the heating system at the date of completion despite that fact that she was not aware of her ability to claim MDR or the need for any photographs of the annex at that time. Her evidence therefore consisted of a mixture of photographs taken from the marketing material at the time, her photographs taken to support the amendment to the SDLT return some 11 months later and those requested during the compliance check a further 9 months down the line. HMRC attempted to discredit the evidence given by the Taxpayer at the hearing as a result of the more recent photographs having been taken after work was done to the property meaning they did not match those used in the marketing materials, something which the Tribunal rightly ignored whilst making it clear that they found the taxpayer to be a credible and honest witness.
The full decision can be found here.
Although MDR is no longer available for purchases in England there will be Taxpayers who are dealing with compliance checks and this decision is a helpful guide as to the approach being taken by the Tribunal as well as a welcome reminder that HMRC are not always right!
If you have received a compliance check and would like advice or representation please get in touch today.
