After a seven-year battle with HMRC, the home care company Marcus & Marcus prevailed and was given a £20,000 refund for overpaying stamp duty. This decision has emerged as a precedent for the tax tribunal’s methodology for allocating the purchase price to various buildings in a “just and fair” manner for SDLT purposes.
In order to apply the 15% higher rate of SDLT, HMRC attempted to divide the purchase price of a property with three homes used to care for adults with autism and learning disabilities such that the main home would be treated as having a value of more than £500,000. However, the tax tribunal agreed with the taxpayer company and HMRC’s argument was defeated.
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History between Marcus & Marcus and HMRC
The business bought a property with multiple structures on it in 2015, including a main house, an annexe, and a summerhouse. Marcus & Marcus were the focus of an HMRC investigation after submitting an SDLT return and paying £33,750. The tax authorities determined that the property was subject to SDLT of 15%, or £131,250, which would have increased the tax by £97,500, or 289%. As a result, the tax authority issued a closure notice.
In 2018, Marcus & Marcus hired Cornerstone Tax, and after further discussions between the two parties that year, it was decided that a new computation known as Multiple Dwellings Relief (MDR) would be applicable and would be done on the basis of a “fair and reasonable apportionment.”
The primary residence, an office, and a summerhouse (two separate buildings on the property) were all included in HMRC’s assessment. The valuation of what HMRC determined to be the “principal house,” according to the agreed-upon parameters, increased to £537,000 as a result, exceeding £500,000 and so being disregarded in the MDR calculation.
Marcus & Marcus and Cornerstone Tax, on the other hand, argued that the office and summerhouse were a component of the annexe and thus continued to be distinct from the main house. According to the agreed-upon parameters, this would make the primary residence’s proportionate worth £404,867 and subject to MDR.
What did the FTT decide?
In April 2022, after being unable to come to an agreement, the parties took the case before the First Tier Tax Tribunal. The judge determined that the office was a part of the residences in the annexe and that the summer house was used along with the main residence. The total amount of SDLT that should have been owed at the time of purchase was found to be £13,749. As a result, Marcus & Marcus was entitled to a $20,001 refund from HMRC.
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