Can HMRC Revoke Multiple Dwellings Relief After Installing a Lockable Internal Door?
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Can HMRC withdraw Multiple Dwellings Relief because a lockable internal door was installed?
Introduction
Readers often search for this issue where a purchase originally qualified for Multiple Dwellings Relief (MDR), but HMRC later argues that later works caused the property to stop being multiple dwellings. A common dispute is whether relatively minor building works, such as installing an internal door, amount to a “disqualifying event” that lets HMRC claw back the relief.
This question matters because MDR claims can involve substantial sums of SDLT. The answer depends on the statutory rules, the physical and functional character of the property, and whether the works genuinely reduced the number of dwellings. In any case involving habitability or suitability for use, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
The Question
A buyer claimed MDR on the purchase of a property said to contain two separate dwellings, including a main dwelling and an annexe. HMRC later challenged the claim and maintained that the installation of a lockable internal door after completion was a disqualifying event. HMRC’s position was that this change meant MDR should be withdrawn.
The buyer’s position was that the door was installed as part of necessary structural and safety works, not as an elective change to combine the dwellings. The buyer also maintained that the annexe still had the features of a separate dwelling, including its own access and facilities, so the number of dwellings had not been reduced.
The practical question was what to do next after HMRC rejected the initial appeal: accept an internal review by another HMRC officer, or appeal straight to the First-tier Tribunal.
Nick’s Explanation
Nick’s advice was that an internal review was the sensible next step. In anonymised form, his view was:
“My strong recommendation is that we accept their offer of an internal review. This is a standard part of the process, and it costs nothing to have a different officer look at the facts.”
He also made clear that taxpayers should be realistic about the process:
“It is entirely likely that this internal review will also be rejected. These reviews often simply confirm the original officer’s decision. We should view this as a necessary procedural step before escalating the matter.”
On the substance, Nick’s reasoning was that HMRC’s argument was open to challenge because a lockable internal door does not necessarily reduce the number of dwellings. His position was that where the works were required for structural integrity and fire safety, and where the annexe still retained the objective characteristics of a separate dwelling, HMRC could be wrong to treat the change as a disqualifying event.
He also argued that if HMRC accepted that MDR was available at the effective date of the transaction, it would be inconsistent to rely again on the same pre-existing features to justify later withdrawal, unless there had truly been a qualifying change in the number of dwellings.
The Law
MDR was contained in Schedule 6B to the Finance Act 2003. Although MDR has now been abolished for most future transactions, disputes still arise for earlier purchases and for HMRC compliance checks into historic claims.
The core legal question in an MDR case is whether, at the relevant time, the transaction involved an interest in more than one dwelling. That usually requires an objective assessment of whether each unit was “suitable for use as a single dwelling”.
Where HMRC seeks to withdraw relief after completion, the legislation on disqualifying events must be considered carefully. In broad terms, if a later event means the conditions for the relief are no longer met within the relevant statutory period, HMRC may assess for additional SDLT.
Whether something is a separate dwelling is highly fact-sensitive. Relevant features often include:
- independent access
- sleeping accommodation
- bathroom facilities
- kitchen or cooking facilities
- privacy and security
- the degree of physical and functional separation from the other unit
Case law has shown that no single factor is always decisive. The tribunal and courts look at the overall picture.
Where a taxpayer argues that a property or part of it was uninhabitable or not suitable for use, the modern threshold is demanding. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition threshold is now relatively high. Ordinary disrepair, inconvenience, or the need for works will often not be enough. The question is whether the property was truly not suitable for use as a dwelling in the relevant legal sense.
Analysis
The analysis usually breaks down into four stages.
First, identify HMRC’s starting point. If HMRC accepted that there were two dwellings at the effective date of the transaction, that is important. It means the later challenge is not really about the original state of the property alone. It is about whether a later event changed that position.
Second, examine the alleged disqualifying event. If the only relevant change was the installation of a lockable internal door, the legal question is whether that work reduced the number of dwellings from two to one. That is not self-evident. A lockable door may preserve separation rather than remove it. If it is fire-rated, lockable, and installed for structural or safety reasons, that may support the argument that it was a protective barrier rather than a unifying alteration.
Third, test whether the annexe or secondary unit still remained suitable for use as a single dwelling after the works. If it still had independent access, its own kitchen, bathroom, and living accommodation, and if an occupier could still live there with a sufficient degree of privacy and security, HMRC may struggle to show that the number of dwellings had actually fallen.
Fourth, separate genuine new facts from old ones. If HMRC relies on matters such as shared outdoor space, key arrangements, or other pre-existing features that were already present when MDR was originally accepted, those points may carry limited weight unless they show that the property was never truly two dwellings or that a later change materially altered the position. The stronger HMRC’s case depends on the door alone, the more important it becomes to show exactly what that door did in practice.
The reference in the correspondence to Fiander and Brower suggests a comparison with authority on privacy, security, and the layout of dwellings. The key point in any such comparison is that a lockable door can support separation, whereas an open internal connection may point the other way. The factual detail therefore matters greatly.
On procedure, accepting an internal review is often a sound step. It preserves the taxpayer’s position, may narrow the dispute, and creates a fuller decision record before any appeal to the First-tier Tribunal. But taxpayers should also keep a close eye on statutory deadlines.
Outcome
The practical conclusion is that HMRC cannot automatically withdraw MDR merely because an internal door was installed. The real issue is whether the later works genuinely caused the property to cease comprising multiple dwellings.
If the door was installed for structural repair and fire safety, was lockable, and the annexe still retained the objective features of a separate dwelling, there may be a strong argument that no disqualifying event occurred at all.
Procedurally, where HMRC rejects the first appeal, accepting an internal review is often the sensible next move before taking the case to the First-tier Tribunal.
Practical Steps
If you are assessing a similar case, the following steps are usually important:
- Obtain the full HMRC decision letter and identify exactly what HMRC says the disqualifying event was.
- Check the statutory deadline for requesting an internal review or filing a tribunal appeal.
- Gather evidence showing the physical and functional separation of the dwellings at the effective date and after the later works.
- Collect plans, surveys, photographs, contractor statements, fire safety information, and any evidence explaining why the works were necessary.
- Show whether the secondary unit retained its own entrance, kitchen, bathroom, living space, and practical privacy and security.
- Compare HMRC’s reasoning against the actual facts. If HMRC relies on incorrect assumptions, identify them precisely.
- If habitability or suitability for use is in issue, assess the evidence against the higher threshold confirmed in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
- Consider whether an internal review should be requested as the next procedural step before tribunal proceedings.
Conclusion
A lockable internal door does not, by itself, prove that MDR should be withdrawn. The decisive question is whether the property still comprised more than one dwelling after the works. Where the secondary unit remained objectively suitable for use as a separate dwelling, and the works were structural or safety-related rather than a true merger, HMRC’s disqualifying event argument may be open to challenge.
Legal References Used
- Finance Act 2003
- Schedule 6B, Finance Act 2003
- Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799
- Fiander and Brower
- First-tier Tribunal (Tax Chamber)
- HM Revenue and Customs
This page was last updated on 22 March 2026.
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