Annexes and stamp duty land tax

24th May 2023 | Asha Ngai | residential, residential real estate

Partner and head of the Residential Real Estate department in Sherrards’ London office, Asha Ngai, highlights how annexes can mean paying less stamp duty. However, there are a few stipulations that buyers must be aware of to qualify for this relief.

A residential property solicitor is often concerned with ensuring that the Stamp Duty Land Tax (SDLT) is never underpaid. They also hold an equally important duty to ensure their client does not overpay on SDLT.

One of the instances in where this can happen is when a property is purchased with the benefit of an annex or several annexes.

Buyers can apply for multiple dwellings relief (MDR) where they buy more than one dwelling in a transaction and rather advantageously this relief is extended to properties with annexes. 

To qualify as an annex, there are several criteria that must be met, and these are:

1. It must have a bathroom and kitchen area and must include ‘facilities for basic domestic living needs’ as required by Fiander and Bower v HMRC (2021).
2. It must have its own front door and have some privacy from the main house.
3. It must be capable of being a separate dwelling although it can be attached to the main house but must have a lockable door between the two properties.

Should the criteria be met, the SDLT can be calculated so as to divide the total amount paid for the properties by the number of dwellings.  The SDLT is then worked out on this figure and multiplied by the number of dwellings.

Solicitors must ensure they make the correct investigations on whether there is an annex by asking the surveyor, the estate agent and the seller’s lawyers.

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