No automatic entitlement to multiple dwellings relief

The taxpayer bought two adjoining properties from the same vendor. The first was a semi-detached house. The second – Old Summer House - was a building that had been used as an artist’s studio. The taxpayer’s solicitor advised him that if the former studio had been in commercial use at the time of completion he would be able to claim mixed used relief. Failing that multiple dwellings relief (MDR) could be claimed.

Two weeks before completion at the instigation of the taxpayer the vendors granted a six-month commercial lease to a photography business to enable the taxpayer to claim mixed use relief.

HMRC refused the claim saying the property was residential and although it was not in use as a dwelling at completion the key was that it was suitable for such use.

The First-tier Tribunal agreed with HMRC about mixed use...