Tuesday 25 October 2022

HMRC Targets Dodgy Granny Annexe Claims


 

The Telegraph reports that HMRC has clawed back millions of pounds from buyers making “granny annexe” tax relief claims. The amount recovered has increased by almost 400% in the last three years, according to a Freedom of Information request by accountancy firm RSM.

Chris Etherington, of RSM, said: 

“They are going to war on granny annexes.”

The loophole – officially known as “multiple dwelling relief” – allows buyers to pay less stamp duty if they are purchasing properties that are linked. This can include a portfolio of buy-to-let properties, or a house with an additional self-contained dwelling, such as a granny annexe.

The presence of an additional dwelling can save thousands in stamp duty. A buyer claiming multiple dwelling relief divides the total sale price by the total number of dwellings and pays stamp duty on the average cost.

The system has become open to abuse. In one case, a buyer purchasing a seven-bedroom house claimed that an en-suite bedroom qualified as a separate dwelling because it had a built-in wardrobe with an electric socket.

This claim was thrown out by HMRC and the buyer was ordered to pay extra tax.

In the tax year ending April 2022, HMRC investigated 222 claims for multiple dwellings relief and recovered £5.8m in falsely claimed stamp duty relief.

This was a surge of 383% compared to the £1.2m recovered in the tax year ending April 2019, the last full year before the pandemic, when HMRC made 124 dwelling relief investigations.

HMRC has warned of a surge in buyers and homeowners being targeted by tax reclaim agents and lodging incorrect claims.

An HMRC spokesman said: 

“We want to help those eligible claim MDR while ensuring the right tax is paid. Our analysis indicates that up to a third of MDR claims are incorrect.”

Tax does have to be taxing.

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