Garden Outbuilding Exempt from Multiple Dwellings Relief: Town v Revenue

The First-tier Tribunal (FTT) in the case of Town v HMRC considered whether a high specification garden outbuilding could be treated as a separate dwelling for the purposes of Stamp Duty Land Tax multiple dwellings relief. The case turns on the meaning of “suitable for use as a single dwelling” in paragraph 7 Schedule 6B Finance Act 2003 and highlights the importance of basic facilities such as a bath or shower when considering annexes and garden buildings for MDR. 

The taxpayer purchased a property that comprised Springwood House, Springwood Cottage and a detached garden outbuilding. An SDLT return was filed which claimed multiple dwellings relief. Following an amendment, HMRC processed the claim on the basis that there were three dwellings and repaid about £10,499 of SDLT. HMRC later opened an enquiry and issued a closure notice on the basis that only two dwellings existed at the effective date of the transaction. In HMRC’s view, the outbuilding was not suitable for use as a single dwelling and the relief was overstated. 

The outbuilding was a well finished structure of around 26 square metres, situated roughly 25 metres from the main house within the garden. It consisted of an open plan living and kitchen area and a separate washroom with a toilet and basin but no bath or shower. There was no separate bedroom. Three sides were formed of floor to ceiling glazed French doors with toughened glass and multi point locks. The building had its own fuse box but no separate utility meters, postal address or Land Registry title. It was used mainly by the taxpayer’s severely disabled daughter, who spent time and some nights there, although her main home remained Springwood House. The outbuilding was later registered separately for council tax, with the effective date backdated to before completion, but this registration took place some months after the purchase. 

The FTT applied the objective multi factor test from Fiander v HMRC [2021] UKUT 156. It accepted that the outbuilding offered a reasonable degree of privacy and security and that some people could choose to stay there. However, it placed real weight on the physical configuration. The very small size, lack of storage and, crucially, the absence of any built in bathing facilities meant that a general occupier could not meet basic hygiene needs with the degree of settled permanence associated with a single dwelling. Arguments that a portable bath could be used were rejected as unrealistic in the context of a high quality permanent structure. The FTT also held that the specific needs or preferences of the disabled daughter did not change the analysis, as the statutory test is objective and looks at suitability for occupants generally. Separate council tax registration was considered of limited relevance because it followed a different statutory test and occurred after the effective date. 

The FTT dismissed the appeal and confirmed that the property comprised two, not three, dwellings at completion. The decision underlines that garden outbuildings and annexes will only qualify as separate dwellings for multiple dwellings relief where they provide the core facilities needed for independent living. In particular, the lack of a bath or shower is likely to be a significant obstacle, even where the building is of high quality and used frequently by a family member. Later council tax registration and sympathetic personal circumstances will not overcome clear physical shortcomings at the effective date. 

Read the full decision for Town v Revenue and Customs [2025] UKFTT 1210 (TC).