The purchaser of a £6.5m property in Oxford has lost an appeal after the Upper Tribunal found he was not entitled to multiple dwellings relief

Appellant Daniel Ridgway initially won his stamp duty land tax (SDLT) appeal at the First Tier Tribunal (FTT) but after HMRC disputed this the Upper Tribunal reversed the decision.

The property, which consisted of land and buildings, and was acquired on 23 August 2017 by multiple owners as it consisted of two separate titles.

Ridgway was advised that, because at the time of purchase the building known as the Old Summer House was being used as a garage and an artist’s studio, he would be able to claim multiple dwellings relief.

He submitted an SDLT return on 1 September 2017 stating it was mixed use, paying £314,500 in tax. The full SDLT charge would have come to £888,750 but with multiple dwellings relief was reduced to £577,500.

On 18 May 2018, HMRC began to investigate the acquisition and on 8 February 2021 issued a closure notice to Ridgway. This stated that the Old Summer House was ‘suitable for use as a dwelling’ as it was residential property according to section 116 of Finance Act 2003 (FA 2003).

Ridgway appealed against HMRC’s amendment and argued that if the property was not mixed use, then it should be eligible for multiple dwellings relief, according to s58D and Schedule 6B FA 2003.

The FTT agreed with Ridgway on this point, finding the building was not residential property, therefore the appellant should be charged SDLT at the residential rate with multiple dwellings relief.

HMRC challenged this and believed that the FTT should have solely looked at the ‘physical characteristics of the building’ when concluding if the property was residential or not.

Ross Birkbeck, the appellant’s lawyer told the Upper Tribunal: “When] Distinguishing between residential and non-residential buildings, parliament intended to reflect their different roles in society and the actual physical and environmental characteristics of buildings as they exist in the real world.”

The Upper Tribunal found that Birkbeck was ‘seeking to put a gloss on the language of s116(1)(a). Parliament has used simple, straightforward language to distinguish residential property and non-residential property’.

Additionally, planning permission was put in for the Old Summer House building in 1996 to be converted to a residential property.

The Upper Tribunal said the FTT did not take this into account.

Leading judges Jonathan Cannan and Vimal Tilakapala concluded: “Overall, we are satisfied that the FTT did not take the planning position into account in deciding that the Old Summer House was not suitable for residential use.

“We are satisfied that the FTT’s failure to take into account the planning position was a material error of law in the decision. In our judgment, the planning position was a relevant factor to take into account, for the same reasons that the covenant in the commercial lease was a relevant factor.’

“We are satisfied therefore, albeit for reasons which were not canvassed before the FTT, that the FTT was wrong to allow the appeal in part and reduce the self-assessment by reference to multiple dwellings relief.”

For these reasons, the tribunal ruled in favour of HMRC and dismissed Ridgway’s appeal against the amendment to his self-assessment made by the closure notice.