SDLT Refund and Multiple Dwellings Relief Enquiry

HMRC has significantly increased scrutiny of SDLT refund claims made after completion, particularly those submitted by reclaim agents on a contingent fee basis. Common grounds for these claims include arguing a property was uninhabitable at completion so should be taxed as non-residential, that a property was mixed-use, or that Multiple Dwellings Relief applied because the property contained more than one dwelling.

HMRC has publicly flagged concerns that many such claims do not meet the statutory conditions when examined closely, and has been actively reviewing amendments made on these grounds. A refund having been paid initially does not mean HMRC has accepted the claim is correct; refunds can be processed before a detailed review and then challenged afterwards.

Multiple Dwellings Relief applies where a transaction includes two or more dwellings, and it recalculates the SDLT due by reference to the average value per dwelling rather than the total consideration. The critical test is whether each part of the property counted as a dwelling genuinely met the definition of a dwelling at the effective date, meaning it was suitable for use as a single dwelling, not merely a room or annexe with some self-contained features.

Claims based on granny annexes, converted garages or ancillary buildings often fail this test where the space lacks genuine independent living facilities or is not legally and physically separate enough from the main house. HMRC will look at floor plans, photographs, planning permissions and the actual layout at completion, not just how the property is described in marketing material.

Claims that a residential property should be taxed as non-residential because it was uninhabitable at completion require a high bar to be met. A property needing renovation, redecoration or modernisation is not automatically uninhabitable; the test generally looks at whether the dwelling could be lived in, considering structural condition, presence of a working kitchen or bathroom, and safety issues such as significant damage.

HMRC has successfully challenged many uninhabitability claims where the property, though dated or requiring cosmetic work, remained capable of use as a dwelling. Evidence such as the property being lived in shortly before or after completion, or estate agent particulars describing it as ready to move into, tends to undermine an uninhabitability argument.

The taxpayer who signed and submitted the land transaction return or amendment remains liable for the correct tax, even if a reclaim agent prepared the figures and reasoning. If HMRC successfully challenges the claim, the buyer must repay the refund with interest, and the reclaim agent's fee, often a percentage of the refund obtained, is typically non-refundable regardless of the outcome.

This means buyers who used a speculative reclaim agent can end up worse off than if no claim had been made at all, having paid a fee for a refund that must later be repaid with interest. Reviewing any speculative SDLT refund claim independently before relying on it is prudent, particularly where the fee is contingent on the claim succeeding.

HMRC can enquire into a return or amendment within the normal enquiry window, or use discovery powers outside that window in appropriate circumstances, to reverse a refund it considers was not properly due. The enquiry will typically request evidence about the property's condition, layout and use at the effective date of the transaction.

Where HMRC concludes the claim was not supported, it will assess the additional SDLT due, which must be paid with interest running from the original due date, not from the date of the assessment. This interest can be substantial if a significant period has passed since the original refund was obtained.

Anyone considering an SDLT refund claim, whether self-prepared or through an agent, should review the statutory conditions carefully and retain contemporaneous evidence of the property's condition and layout at completion, such as photographs, surveys and floor plans. A claim that cannot be evidenced to this standard is vulnerable to later challenge regardless of how it was originally justified.

Where a claim has already been made through a reclaim agent, obtaining an independent review of the reasoning and evidence used, before HMRC raises questions, allows time to prepare a considered response or to plan for potential repayment rather than being caught unprepared by an enquiry letter.