The number of dwellings in a transaction can push the LBTT charged up or down. LBTT can go up because multiple dwellings can trigger the Additional Dwelling Supplement (ADS) charge. LBTT can go down due to multiple dwellings relief (MDR) and the non – residential rates applying. A number of English first tier tribunal decisions have considered the question of one dwelling or two in detail in the context of SDLT.

The purchase of what appears to be a single house can sometimes turn out to be the purchase of two dwellings for LBTT purposes. Buying two dwellings at the same time means that Additional Dwelling Supplement (ADS) is likely to be payable on at least one of the dwellings (if the other is the replacement of a main residence) or even on both dwellings.

Is a basement or annex a separate dwelling in its own right ?

A house with a basement or annex can be the purchase of two dwellings, if the basement or annex is a separate dwelling in its own right. The central test developed in a number of recent SDLT cases appears to be "is the separate area sufficient for a person unconnected to the buyer to live in independently?". There is no single factor which determines this, and number of points have to be taken into account in answering that question. A separate dwelling needs to include all the requirements of day to day living, including:-

  • sleeping and living areas;
  • a bathroom;
  • a kitchen area with separate plumbing and power for an oven or microwave;
  • independent access, ie access which does not lead through the main house; and
  • privacy (ie lockable doors, or no direct access between dwellings).

While Revenue Scotland have suggested in correspondence that other factors such as having a separate postal address, council tax treatment and separately metered utilities are important, the English first tier tribunal have not found them to be conclusive.

Multiple dwellings relief

If there are two or more dwellings, a claim for Multiple Dwellings Relief (MDR) should be considered. An MDR claim means that LBTT is paid on the average price per dwelling, subject to a minimum of 25% of the LBTT payable without the relief. The saving from an MDR claim can actually be more than the ADS charge.

If there are six or more dwellings in a single transaction, then the non-residential rates of LBTT will apply to the entire purchase, and full relief from the ADS is available. MDR can also be claimed while retaining the benefit of the non-residential rates.

This is a challenging area and has been the subject of a number of recent tax tribunal cases. It merits detailed consideration prior to purchase so that MDR can be claimed if appropriate. It is preferable to claim MDR in the LBTT return submitted for the purchase. Although an MDR claim can be made by amending the return up to 12 months after submission, claiming MDR later can often trigger a Revenue Scotland enquiry.


Isobel d'Inverno

Director of Corporate Tax