Jeremy Town v The Commissioners for HMRC

With the consent of the parties, the form of the hearing was video using the Teams video platform. A face to face hearing was not held at the Appellant’s request due to his caring responsibilities for his disabled daughter.

The documents to which we were referred are included in a document bundle of 253 pages and the Respondents’ skeleton argument of 10 pages.

Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.

This appeal concerns Stamp Duty Land Tax (SDLT) and in particular whether the Appellant (Mr Town) is entitled to claim Multiple Dwellings Relief (MDR) on the acquisition of a property at Springwood House, Appledore Road, Kent TN30 7DH (the Property) for £1,512,500 on 30 June 2021 (the Purchase) calculated on the basis that it was comprised of three separate dwellings.

Mr Town asserts that the Property was comprised of three single dwellings on the 30 June 2021, the effective date of the transaction (EDT), and therefore qualified for MDR calculated on that basis. The Respondents (HMRC) assert that the Property was comprised of two single dwellings on the EDT and so qualified for MDR calculated on that basis.

Mr Town is appealing against a closure notice issued by HMRC on 27 October 2023 pursuant to paragraph 23 of Schedule 10 to the Finance Act 2003 (FA 2003) which amended Mr Town’s SDLT return in respect of the Property making £10,499 repayable by Mr Town to HMRC. This amount is the additional SDLT that HMRC assert is due from Mr Town as a consequence of HMRC calculating Mr Town’s claim for MDR on the Purchase, on the basis of it being comprised of two single dwellings rather than three single dwellings.

On 30 June 2021, Mr Town purchased the Property, which included, what we refer to neutrally as Springwood House, Springwood Cottage and the Summerhouse.

On 7 July 2021, Mr Town filed his SDLT return which included a claim for MDR on the basis that the Property was comprised of two single dwellings.

Mr Town’s agent, Hallet & Co (the Agent), wrote to HMRC by letter dated 7 April 2022 requesting an amendment to Mr Town’s SDLT return and requesting a repayment of SDLT on the basis that the Property was in fact made up of three single dwellings.

HMRC gave effect to the requested amendment on 26 May 2022 and repaid Mr Town the resulting reduction in SDLT of £10,499.

However, on 11 January 2023 HMRC opened an enquiry into Mr Town’s amended SDLT return and on 27 October 2023 HMRC issued a closure notice concluding that the Property was made up of two single dwellings at the EDT. The closure notice amended Mr Town’s SDLT return accordingly making an additional £10,499 SDLT due.

The legislation governing SDLT is set out in Part 4 of the FA 2003. Unless otherwise stated, references to sections and schedules in this decision are to sections and schedules of the FA 2003 as it was in force on the EDT.

Section 42 makes SDLT chargeable on land transactions and section 55 sets out the applicable rates of SDLT payable by reference to the amount of consideration paid and whether the relevant land consists of entirely residential property or includes non-residential property. SDLT is chargeable on the EDT of a land transaction which in this case means the date of completion (section 119).

On the EDT the applicable rates of SDLT payable on a residential land transaction were as follows:

Section 58D introduces Schedule 6B which provides for MDR, the effect of which, as set out in paragraph 4 of Schedule 6B, is to lower the effective rate of SDLT by dividing the chargeable consideration by the number of dwellings which are the subject matter of a land transaction, applying the applicable rates in section 55 to that amount to establish the SDLT charge in relation to each dwelling and then multiplying that amount by the number of dwellings to calculate the total SDLT chargeable on the residential land transaction.

Paragraph 2 of Schedule 6B identifies the transactions to which MDR applies which includes a land transaction if its main subject-matter consists of an interest in at least two dwellings (paragraph 2(1)(a) and 2(2)(a)). The reference in Schedule 6B to an interest in a dwelling is to any chargeable interest in or over a dwelling (paragraph 2(5)).

Paragraph 7 of Schedule 6B contains rules for determining what counts as a dwelling for the purposes of Schedule 6B, the relevant part of which for the purpose of this appeal provides at sub-paragraph (2) that:

“A building or part of a building counts as a dwelling if-

(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.”

The key issue for us to determine is therefore whether the Property was made up of three dwellings at the EDT, as contended by Mr Town, which in turn will require us to determine whether the Property comprised of three buildings or parts of a building that are suitable for use as a single dwelling.

What counts as being suitable for use as a single dwelling is not defined in the legislation but the leading authority on what constitutes a single dwelling for the purpose of SDLT is the decision of the Upper Tribunal in the case of Fiander and Bower v HMRC [2021 UKUT 0156 (Fiander) which binds us. At paragraphs [47] – [48] of that decision the Upper Tribunal stated as follows:

“47.

The HMRC internal manuals on SDLT contain various statements relating to the meaning of “dwelling” and “suitable for use as a single dwelling”, but these merely record HMRC’s views and do not inform the proper construction of the statute.

48.

We must therefore interpret the phrase giving the language used its normal meaning and taking into account its context. Adopting that approach, we make the following observations as to the meaning of “suitable for use as a single dwelling”:

(1)

The word “suitable” implies that the property must be appropriate or fit for use as a single dwelling. It is not enough if it is capable of being made appropriate or fit for such use by adaptations or alterations. That conclusion follows in our view from the natural meaning of the word “suitable”, but also finds contextual support in two respects. First, paragraph 7(2)(b) provides that a dwelling is also a single dwelling if “it is in the process of being constructed or adapted” for use as single dwelling. So, the draftsman has contemplated a situation where a property requires change, and has extended the definition (only) to a situation where the process of such construction or adaption has already begun. This strongly implies that a property is not suitable for use within paragraph 7(2)(a) if it merely has the capacity or potential with adaptations to achieve that status. Second, SDLT being a tax on chargeable transactions, the status of a property must be ascertained at the effective date of the transaction, defined in most cases (by section 119 FA 2003) as completion. So, the question of whether the property is suitable for use as a single dwelling falls to be determined by the physical attributes of the property as they exist at the effective date, not as they might or could be. A caveat to the preceding analysis is that a property may be in a state of disrepair and nevertheless be suitable for use as either a dwelling or a single dwelling if it requires some repair or renovation; that is a question of degree for assessment by the FTT.

(2)

The word “dwelling” describes a place suitable for residential accommodation which can provide the occupant with facilities for basic domestic living needs. Those basic needs include the need to sleep and to attend to personal and hygiene needs. The question of the extent to which they necessarily include the need to prepare food should be dealt with in an appeal where that issue is material.

(3)

The word “single” emphasises that the dwelling must comprise a separate self-contained living unit.

(4)

The test is objective. The motives or intentions of particular buyers or occupants of the property are not relevant.

(5)

Suitability for use as a single dwelling is to be assessed by reference to suitability for occupants generally. It is not sufficient if the property would satisfy the test only for a particular type of occupant such as a relative or squatter.

(6)

The test is not “one size fits all”: a development of flats in a city centre may raise different issues to an annex of a country property. What matters is that the occupant’s basic living needs must be capable of being satisfied with a degree of privacy, self-sufficiency and security consistent with the concept of a single dwelling. How that is achieved in terms of bricks and mortar may vary.

(7)

The question of whether or not a property satisfies the above criteria is a multi-factorial assessment, which should take into account all the facts and circumstances. Relevant facts and circumstances will obviously include the physical attributes of and access to the property, but there is no exhaustive list which can be reliably laid out of relevant factors. Ultimately, the assessment must be made by the FTT as the fact-finding tribunal, applying the principles set out above.”

There have been a number of FTT decision on the application of the Fiander principles set out above. However as stated in the FTT decision in Winfield v HMRC [2024] UKFTT 734 (TC) at [16]:

“Limited help can be given by previous decisions which turn on their own facts. So, for example HMRC rely on Dower v HMRC [2022] UKFTT 170 (“Dower”) as authority that privacy is something which carries considerable weight. But in Dower it was also true that there was no kitchen. And this should colour other elements of the judgment”

Further in Benjamin Packman (1) and Miranda Wood (2) v HMRC [2024] UKFTT 954 (TC), the FTT agreed with the above view in Dower commenting as follows:

“[22] We were referred to a number of first instance decisions on both sides, however for the reasons given in Winfield we do not derive any real assistance from them as their fact patterns are different, and none establish any new principles.

[23] Both parties’ attempts to piece together, jigsaw like, individual findings from individual cases is not in the end helpful where we must conduct a multi-factorial exercise on the facts as a whole as we find them to be in this case.”

Mr Town did not provide a written witness statement but he provided oral evidence at the hearing, was cross examined by Ms Truelove for HMRC and answered questions from the panel.

In the hearing bundle we were provided with the marketing materials from Warner Gray who were the estate agents when Mr Town purchased the Property.

The marketing material included photos of the interior and exterior of the Summerhouse and the rest of the property as well as a floor plan.

From the above and from other documentary evidence contained in the hearing bundle, which included correspondence, photos and plans from the Agent and Mr Town, we make the following findings of fact as at the EDT:

The burden of proof is on Mr Town to establish that on a balance of probabilities the Property is comprised of three single dwellings. HMRC accept that Springwood House and Springwood Cottage are each single dwellings. Mr Town must therefore establish that on a balance of probabilities, the Summerhouse was suitable for use as a single dwelling on the EDT.

In summary Mr Town submitted as follows:

In summary Ms Truelove for HMRC submitted that the Summerhouse was not suitable for use as a single dwelling at the EDT for the following reasons:

The Summerhouse sits in the garden of Springwood House and as such it would not offer the occupant of either property complete privacy or security if they were independently occupied. The test is however not complete privacy and security, only that there is “a degree” of privacy and security “consistent with the concept of a single dwelling”.

The Summerhouse does not have a fenced off separate garden and consequently the occupant of Springwood House would be able to go up to the French Windows on the three of the four walls of the Summerhouse. However a single dwelling will very often have windows that look out onto a street, common land or other property and many do not have a fenced off area in front of the window. This potential lack of privacy is counterbalanced in the case of the Summerhouse by the fact that it is positioned approximately 25 metres from Springwood House and that the two of the French windows open onto a pond and open fields. Consequently, unless someone purposefully walks up to the property and looks into the French windows, it is not easy to see into it. Further the Summerhouse is secured with toughened glass and multipoint locks.

It follows that we do not consider the degree of privacy and security offered by the Summerhouse to be inconsistent with a single dwelling.

It is not unusual for the cost of utilities to be included as part of the rent and so we do not consider that the lack of separate utility meters or bills for the Summerhouse is determinative, nor is its lack of a separate postal address. Although these are factors to take into consideration as part of the multifactorial test.

Equally however we do not consider that the fact that the Summerhouse is separately registered for Council Tax is evidence that it is a single dwelling. The Summerhouse was not registered separately for Council Tax at the EDT and it is not clear that the Local Authority made any assessment as to whether the Summerhouse met the statutory test for separate Council Tax registration, which is in any event different to the test for a single dwelling for MDR.

Whilst this is a multifactorial test, some factors carry greater weight than others and the physical configuration carries considerable weight.

In this appeal, the physical configuration is that the entire Summerhouse is very small at approximately 26 square metres, with no storage space for clothes and personal items outside of the kitchen area, and with no bath or shower. A bath or shower could in theory be installed, but the wash room is very small, and in any event we need to consider the physical configuration at the EDT. For most people their hygiene needs could not be met with the necessary settled permanence without access to a bath or shower and a portable bath would not generally be an acceptable alternative. Nor in such a small space would it be very practical. In light of the very high specification to which the Summerhouse has been finished, expecting a settled occupant to use a portable bath also seems quite incongruous.

Mr Town placed a lot of weight on the fact that the Summerhouse suited his disabled daughter’s needs and the family find it a very important facility to support her needs. Mr Town submitted that HMRC are being discriminatory by refusing to accept that the Summerhouse is a single dwelling because it may not suit the needs of an occupier who does not have special needs.

We disagree with this submission for two main reasons.

Firstly, Mr Town’s daughter does not occupy the Summerhouse as a single dwelling in any event. She lives in Springwood House and uses the Summerhouse to spend time in, often sleeping in it and washing in it, but not as a single, self-contained, dwelling. As such Mr Town’s daughter’s use of the Summerhouse does not provide support for his assertion that it is a single dwelling that meets all of her needs.

Secondly, even if the Summerhouse did meet all of his daughter’s needs, the test that HMRC, and on appeal the Tribunal, must apply is an objective test. As already quoted from [48] of Fiander above:

“[4] … The motives or intentions of particular buyers or occupants of the property are not relevant.

(5)

Suitability for use as a single dwelling is to be assessed by reference to suitability for occupants generally. It is not sufficient if the property would satisfy the test only for a particular type of occupant such as a relative or squatter.”

The fact that Mr Town’s daughter, who is severely disabled and therefore has very particular needs, enjoys using the Summerhouse does not assist Mr Town in satisfying the above objective test. He must demonstrate that the Summerhouse is objectively suitable for occupation generally as a single dwelling.

Taking a multifactorial test therefore we find that the security and relative privacy of the Summerhouse does not outweigh the combination of its small size, lack of storage space and a lack of shower or bath. As a result the Summerhouse does not enable a general occupier to inhabit it with the degree of settled permanence necessary to form a single dwelling. As stated by the FTT in Dower:

“In the SDLT context, a residential property that is used or suitable for use as a “dwelling” is to be construed as a building (or part of a building per s.116(6)) whereby the occupier can inhabit with a degree of settled permanence so as to form the centre of his existence.”

We agree with HMRC’s submission that, when looked at objectively, the Summerhouse is in fact a very luxurious Summerhouse in the large garden of Springwood House which the occupants of Springwood House can and do use to spend periods of time in when enjoying the garden or caring for their daughter.