The importance of clear separation and accessibility ...
Posted by Helen Beaumont on 23/10/2024 @ 8:00AM
In the realm of property taxation, the case of Shine Business Limited serves as a cautionary tale for those seeking Multiple Dwellings Relief (MDR). The owner purchased a £1.9 million property in Purley ...
If your bathroom leads through to the Annexe then HMRC will have an issue with MDR!
They had the intention of turning it into two separate dwellings, however, what seemed like a straightforward case of tax relief quickly descended into a complex legal battle due to an unusual access arrangement.
"The intricacies arise from the property's design, particularly the access to the annexe!"
The sole entrance was via a bathroom connected to the main house. This led HMRC to question whether the annexe could genuinely be considered a separate dwelling capable of meeting the basic living needs of its respective occupier.
According to HMRC guidelines, a portion of a property must provide the facilities necessary to cater to the basic needs of its occupants for it to qualify as a dwelling. These include a kitchen for meal preparation, a suitable living area, and adequate access.
In the case of Shine, the absence of direct kitchen facilities in the annexe raised red flags for HMRC. The agency argued that the unconventional access through the bathroom significantly undermined the claim for MDR.
The hearing scrutinised whether the annexe had sufficient food preparation, cooking, and storage facilities. Shine's barrister, Graham Callard, argued that the necessary amenities were present, suggesting that a small barrier such as a curtain could be introduced to ensure privacy between the main house and the annexe.
"This argument did not resonate with the tribunal!"
The tribunal Judge summarised the court's sentiment by stating that the unique access route and the interlinked design of the property could not provide the level of privacy or security expected of a separate dwelling. The conditions of access were deemed inadequate, leading to the dismissal of the appeal.
The ruling in this case underscores the necessity for property owners seeking MDR to ensure that their properties meet strict, clearly defined criteria. The loss of £64,250 in tax relief serves as a stark reminder that all attributes of a property are meticulously examined by HMRC.
"And that includes access routes!"
For those considering a claim for MDR, it is essential to assess both the structural design and the functional arrangements of the property thoroughly. Only through careful planning and adherence to the requisite criteria can one secure the intended tax relief effectively.
The implications of the Purley case offer a compelling narrative on the complexities of MDR and the importance of clear separation and accessibility in property claims.
Until next time ...
HELEN BEAUMONT
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about Multiple Dwellings Relief (MDR), do give me a call on 01908 774323 and let's see how I can help you.
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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