A Pool House With Its Own Kitchen, Shower and Drive Was Not a Separate Home. The Buyer Lost an £80,750 Stamp Duty Claim

What the Tribunal Decided

Multiple dwellings relief let a buyer of two or more dwellings in one transaction work out stamp duty land tax (SDLT) on the average price per dwelling, then multiply it back up, subject to a minimum of 1% of the total price. On a large house with an annexe it could cut the bill by tens of thousands of pounds. A building counted as a dwelling if it was “used or suitable for use as a single dwelling” (paragraph 7(2)(a) of Schedule 6B to the Finance Act 2003).

Smith v HMRC [2026] UKFTT 01351 (TC), decision TC 10022, was heard by video on 2 July 2026 by Tribunal Judge Rosa Pettifer and Tribunal Member Helen Myerscough, and released on 18 September 2026. The buyer paid £2,600,000 on 14 December 2023 for about three acres near Tenterden with an eight-bedroom main house, and filed his return on 18 December 2023. He later claimed MDR on the basis that the pool house was a second dwelling. HMRC rejected the claim in a closure notice dated 21 February 2025 (paragraphs 3, 4 and 25 to 27). The tribunal dismissed his appeal.

Both sides relied on the Upper Tribunal's test in Fiander and Brower v HMRC [2021] UKUT 0156 (TCC), at paragraph 48. A dwelling must provide facilities for basic domestic living needs, and those needs must be capable of being met “with a degree of privacy, self-sufficiency and security consistent with the concept of a single dwelling”. The test is objective. It looks at occupiers generally, not at a relative or a particular buyer, and at the property as it stood at completion.

What the Pool House Had

The pool house was a single-storey, timber-clad building with a pitched tiled roof. The tribunal's findings, as at completion:

HMRC argued that the building was too small to live in, with the kitchen taking half the main room and nowhere to keep belongings. The tribunal disagreed on both points (paragraphs 39 and 40). It found that the pool house provided space for sleeping, a private toilet, washbasin and shower, and somewhere to prepare and eat food, so basic living needs were met: “a material factor pointing towards MDR being available” (paragraphs 41 and 42).

Why Privacy Decided It

The tribunal said a lack of privacy and security can outweigh every other factor, while agreeing with an earlier decision, Berrell and Thomas v HMRC [2025] UKFTT 01067 (TC), that privacy does not need to be absolute (paragraph 43). It accepted that the distance, the separate driveway and the lockable doors gave a degree of privacy consistent with a single dwelling (paragraph 45). It did not accept the buyer's point that trees hid the two buildings from each other, because the only photographs were taken when the trees were in leaf. The problem was the pool.

Because the test is objective, the tribunal asked on what realistic terms one household could live in the pool house while another lived in the main house (paragraph 48). The buyer's counsel put forward two arrangements, and the tribunal rejected both:

• The main house gives up the pool. That would solve the privacy problem, but the tribunal was not satisfied that occupiers of what it called an impressive property would realistically give up “a significant amenity” (paragraph 49).
• The pool is shared. Curtains or blinds could stop the two households seeing into each other (paragraph 50). But anyone from the main house would have to walk more than 200 feet each way in swimwear, or change in the open air, and “in reality any shared use of the pool would involve occupiers of the Main House using the facilities, at least the shower and toilet, of the Annexe”. That would suit only “a particular type of occupier (eg relatives or friends)”, not occupiers generally (paragraph 51).

Marketing material for other homes with shared pools did not help, because none was laid out like this one. Nor did an Airbnb listing: holiday lets are where “people may be prepared, in the context of privacy, to compromise more than they would be more generally” (paragraph 51).

The shared meters, address, council tax rating and single title counted against the claim, but the tribunal placed “very limited weight” on them, because bills can be apportioned and post arranged (paragraph 55). The pool house's own heating, stop tap and fuse board carried “some limited weight” the other way (paragraph 56). The conclusion: the pool house did not meet, “by reference to occupiers generally, basic living needs with a degree of privacy, self-sufficiency and security consistent with the concept of a single dwelling. We rely particularly on our findings in relation to privacy and security” (paragraph 57).

The £80,750: How the Figures Work

What It Means for Annexes Now

MDR was abolished for transactions with an effective date on or after 1 June 2024. It still applies where contracts were exchanged on or before 6 March 2024 and were not varied, assigned or sub-sold after that date, whenever completion takes place. The usual way to add an MDR claim after filing was to amend the return within 12 months of the filing date, so for most purchases that window has closed. The transitional rules are in our multiple dwellings relief guide.

The question of whether an annexe is a separate dwelling has not gone away. The rules for the higher rates use the same words: a building counts as a dwelling if “it is used or suitable for use as a single dwelling” (paragraph 18(2)(a) of Schedule 4ZA to the Finance Act 2003). Buying a house with an annexe that is a separate dwelling can bring in the 5% higher rates even if you own nothing else, unless the annexe counts as subsidiary to the main house, and HMRC says first-time buyer relief is not due where a purchase consists of two or more dwellings (SDLTM29821). Our guide to granny annexe stamp duty covers both rules.

• A kitchen and a shower are not enough on their own. The tribunal looked at how two households could realistically live side by side, and a facility that one of them would need to use decided it.
• Labels do not decide it either way. Calling the building a pool house in the brochure, and never having lived in it, were irrelevant. So were the buyer's plans for it, because the test is objective.
• Separate meters and addresses carry little weight. Their absence counted only slightly against the pool house, and having its own heating and fuse board counted only slightly in its favour.

Smith was decided under the MDR rules and does not decide a higher rates case. It is a First-tier Tribunal decision on its own facts and binds no other tribunal, and the tribunal itself warned against piecing together principles from other first-tier annexe decisions with different facts (paragraph 35). The buyer had 56 days from when the decision was sent to him to apply for permission to appeal (paragraph 59). Whether he has applied is not on the public record.

If someone offers to reclaim stamp duty on a house with an annexe, check the dates and the test before you sign anything. SDLT is self-assessed, so if a claim is paid and later overturned, the tax is repaid with interest. For deadlines and the other routes, see Stamp Duty Refund: Can You Claim It Back?

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