Smith and Smith v HMRC TC/2024/02856
This was another successful appeal on behalf of our clients concerning a property with a detached annex which HMRC argued was not suitable for use as a single dwelling meaning that the Taxpayers’ claim for Multiple Dwelling Relief (MDR) was rejected.
Facts
The property consisted of a 5 bedroomed family and a detached annex. The annex is accessed from the main drive, which is shared with the Main House. It is attached to, and is located beside and above, a sheltered car port and has a lockable external door to the rear of the car port.
The annex consisted of a kitchen on the ground floor with stairs up to a living/sleeping area and bathroom on the first floor. The stairs were a ladder style staircase which was fixed and sturdy. The first floor of the annex had a sloped ceiling with some restricted headroom. HMRC accepted that the annex possessed a number of the physical facilities necessary to be considered a single dwelling but argued that concerns in relation to privacy, safety and independence outweighed those physical factors and rendered the annex unsuitable for use as a single dwelling. The Tribunal rejected those arguments and provided further useful guidance as to the application of relief whilst taking into account the UT’s guidance in Fiander and Brower v HMRC [2021] UKUT 0156 (TCC)
Minor adaptations after the EDT do not prevent MDR
HMRC argued that the ladder style stairs and lack of fire safety certificate posed safety concerns so great that they outweighed the factors supporting suitability for use as a single dwelling. The Tribunal did not agree and accepted our submissions that a handrail could be added after completion should an occupier require it and to do so would be a minor alteration so as not to offend the Upper Tribunal’s guidance in Fiander.
Tenancy Agreements entered into after the EDT can address certain weaknesses
The Tribunal agreed with us that a tenancy agreement could be entered into after completion and could deal with the apportionment of utilities as well as matters in relation to privacy and independence. The fact that no such tenancy agreement was in place prior to completion was not relevant.
Suitable for occupants generally does not mean suitable for everyone
One of the arguments put forward by HMRC was that the ladder style stirs meant that the annex was not suitable for use by occupiers generally given that someone with mobility issues would not be able to use them. It was our position that suitable for occupiers generally did not mean that the annex should be suitable for everyone and the Tribunal accepted this argument:
“48. As set out in Fiander, there is not a “one size fits all” test, and we are satisfied that the Cart Lodge offers accommodation which would satisfy the basic living needs of those who would accept its particular attributes and so choose to be in occupation, and that it does provide a degree of privacy, self-sufficiency and security consistent with the concept of a single dwelling.”
HMRC’s approach
Throughout the enquiry and appeal HMRC continued to refer to the specific facts of previous decisions dating back to 2021 to support their position despite a number of recent decisions making it clear that this is neither helpful nor the correct approach. The Tribunal again made it clear in this decision that each case must be decided on its own facts, something we hope HMRC will take note of in future appeals.
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