In John Smith v HMRC, published on 30 September 2026, the tribunal held that a well-equipped pool house 200 feet from the main house was not a separate dwelling. The shared pool outside its doors meant occupiers generally would lack privacy and security. Multiple dwellings relief was refused and £301,250 of SDLT stood.
Key facts
- John Smith v HMRC [2026] UKFTT 1351 (TC) was decided on 18 September 2026 and published on 30 September 2026[1].
- A pool house more than 200 feet from the main house, with its own drive and lockable doors, was not a separate dwelling[1].
- Shared use of the pool defeated privacy and security, and that outweighed the annexe's own facilities[1].
- Shared meters, postal address and council tax rating were given very limited weight[1].
- MDR is abolished for transactions completing on or after 1 June 2024, unless contracts were exchanged on or before 6 March 2024 and not varied[2].
What happened in the case?
The buyer paid £2.6m in December 2023 for a country house with about three acres and a single-storey pool house. He claimed multiple dwellings relief (MDR), which would have cut the SDLT from £301,250 to £220,500[1].
HMRC refused the claim. The First-tier Tribunal dismissed his appeal[1]. The decision is dated 18 September 2026 and was published on 30 September 2026.
What test decides whether an annexe is a dwelling?
MDR needs the purchase to include an interest in more than one dwelling[3]. A building counts if it is used or suitable for use as a single dwelling[4].
The tribunal applied the Upper Tribunal's test from Fiander and Brower. "Suitable" means fit for use as it stands, not after alterations. The building must meet basic living needs with a degree of privacy, self-sufficiency and security consistent with a single dwelling[1]. The test looks at occupiers generally, not the buyer's own family.
Why did the pool house fail the test?
On paper it looked strong. It sat more than 200 feet from the main house, behind a stream and trees, with its own drive, parking, lockable doors, heating and fuse board[1]. The tribunal accepted it had room to sleep, a kitchen area, a shower and a WC[1].
The problem was the pool. The pool house's French doors opened straight onto it. The tribunal found it unrealistic that the main house would give the pool up. Shared use would mean people from the main house using the annexe's shower and toilet[1].
That arrangement would only suit a particular type of occupier, such as relatives or friends. It failed on privacy and security[1].
Do shared meters and council tax matter?
Less than many buyers assume. The pool house shared its council tax rating, postal address and meters with the main house. The tribunal gave these very limited weight, because costs can be apportioned in a rent[1].
Its independent heating, stop tap and fuse board helped, but did not decide the case[1]. Holiday-let listings were rejected as evidence, because guests accept compromises other occupiers would not[1].
What does this mean for a North West developer or investor?
MDR was abolished for transactions completing on or after 1 June 2024. It still applies where contracts were exchanged on or before 6 March 2024 and not varied after that date[2]. So the direct effect is on open enquiries and amendment claims on older purchases.
The wider point is the dwelling count. HMRC's guidance says it matters for the higher rates for additional dwellings and for classifying the property[5].
If a purchase relies on an annexe or outbuilding counting as a separate dwelling, look at the shared amenities as well as the building. A shared pool, courtyard or garden next to the door can tip the balance. See also our guides to subsidiary dwelling relief and multiple dwellings relief.
Purchase price: £2,600,000
SDLT without MDR: £301,250
SDLT with MDR, as claimed: £220,500
Relief at stake: £80,750[1]
The whole £80,750 turned on one question: could a stranger live in the pool house as a home of their own?
A fair outcome on these facts, and a useful warning. Annexe claims are won or lost on how the building sits with the rest of the property, not just on what's inside it.
Plans, photographs and a realistic picture of how a separate occupier would live there matter more than the agent's brochure. If a claim depends on a shared amenity staying available to someone else, expect HMRC to test it.
Common questions
Can a garden annexe ever count as a separate dwelling?
Yes. The question is whether it suits occupiers generally as a single dwelling, with enough privacy, self-sufficiency and security[1]. Some annexes pass. This one failed because of the shared pool.
Does the case matter now MDR has been abolished?
For older purchases, yes. MDR still applies to contracts exchanged on or before 6 March 2024 and not varied after[2]. The dwelling count also feeds the higher rates for additional dwellings[5].
Do separate meters make an annexe a dwelling?
Not on their own. The tribunal gave shared meters and council tax very limited weight either way[1].
Is a holiday-let listing good evidence that an annexe is a dwelling?
Not in this case. The tribunal rejected holiday-let comparisons because guests accept compromises other occupiers would not[1].
Sources
- John Smith v The Commissioners for HMRC [2026] UKFTT 1351 (TC). caselaw.nationalarchives.gov.uk/ukftt/tc/2026/1351
- HMRC Stamp Duty Land Tax Manual SDLTM29901: abolition of MDR. www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm29901
- Finance Act 2003, Schedule 6B: transfers involving multiple dwellings. www.legislation.gov.uk/ukpga/2003/14/schedule/6B
- HMRC Stamp Duty Land Tax Manual SDLTM29955: meaning of dwelling for MDR. www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm29955
- HMRC Stamp Duty Land Tax Manual SDLTM00410: how many dwellings?. www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00410
Kieran Holsgrove is a Director and Co-Founder of Grafene Accounting, the property tax specialist firm based in Liverpool. He advises property developers, investors and landlords across Merseyside, Greater Manchester, Lancashire and Cheshire on tax structuring, developer VAT, SDLT and the long-view decisions that compound over the life of a portfolio.
This article is general information, not personal tax advice, and tax rules change. Your own position depends on facts we cannot see from here. Please take advice before acting on anything above.