Multiple Dwelling Relief  – Stamping Down on the Claims Farmer

The time has come for the profession to stand up to the claim farmers[1] who are actively using records from Zoopla and the Land Registry to locate potential professional negligence claims against conveyancers. 

This stems from alleged failure to advise on the availability of the Stamp Duty Land Tax ( SDLT) relief known as Multiple Dwelling Relief (MDR). The claim farmers and their pet solicitors are on the look out for those transactions normally  involving the purchase of a property with a self contained annex.

What is MDR?

MDR applies to properties purchased when you buy two or more single dwellings either in a single transaction or in a scheme, arrangement, or series of linked transactions. It allows the SDLT to be computed by reference to the average value of the properties purchased, multiplied by the number of dwellings instead of by reference to the total purchase price of all the dwellings. This can lead to a significant reduction in the amount of SDLT charged. The relief must be claimed using code 33 in the SDLT return.

The professional negligence claim

The typical claim involves an allegation of a failure to advise on the availability of this relief  and of how this led to the client losing the opportunity to pay less SDLT.  The loss claimed is the difference between the tax paid and that tax which would have been paid had the relief been sought.

Breach of Duty

The issues are relatively straight forward.    To begin with, can it be said there was a duty to advise, and if so, is there evidence to show a breach of that duty.    It is unlikely given the nature of the claim the claimant will be alleging the conveyancer failed to act on instructions.  The onus therefore will be on the claimant to prove the availability of MDR was so clear and obvious that an implied duty to advise arose.    To do this the claimant will need to show that at the time the transaction was in progress MDR was within the awareness of a reasonably competent residential conveyancer.

Background to MDR

The relief was introduced in 2011 in substantially the same form as it applies today. Its primary importance was to encourage investment in the private rented  sector.  It was commonly referred to as ‘bulk purchase relief’.

Its purpose was not to encourage the purchase of family homes with an annexe by owner-occupiers.    In fact the practice of claiming relief on houses with annexes only arose out of the introduction of the residential higher rates  and an amendment to that  legislation[2] in April 2016. Until this amendment, the practice was to treat an annex as part of the dwelling for which it subsists rather than as a separate dwelling irrespective of its physical or legal suitability for use as a separate dwelling. Clearly had it been clear before that point that an annex was to be treated as a single dwelling there would have been no need for that amendment.

A HMCR Guidance Note published on 16 March 2016, contained little information on self-contained dwellings[3]   Instead, it seemed to suggest that if a granny flat was to be purchased along with the main dwelling  higher tax would be charged at the higher rate.  Chapter 4 dealt with the purchase of multiple dwellings in a single transaction, though it made no specific mention of self-contained dwellings such as granny flats. Paragraph 4.1 made clear that if two or more dwellings are considered in the same transaction, the normal rates or higher rates should be applied to the whole purchase price, rather than using a mixture of rates.

The Finance Act 2016 came into force on 15 September 2016, but the amendments were retrospective going back to 1 April 2016. A revised Guidance Note was published on 29 November of that year and covered the subject of granny flat-style separate dwellings[4]. This official guidance was subsequently moved to the HMRC Manual, while the Guidance Note PDF was removed.

The rules state that a building or part of a building can still count as a dwelling if it is suitable to be used as such. This may be the case even if it is not currently being used or intended to be used in the future as a separate dwelling.

The revised Guidance Note ( November 2016 ) which is now set out in the Manual states at 2.1 that: “A self-contained part of a building will be a separate dwelling if the residents of that part can live independently of the residents of the rest of the building, including independent access and domestic facilities.”

There was an article on the subject in the Law Gazette issued in late 2016[5] article and it was not until 2019 that the Conveyancing Quality Scheme (“CQS”) made SDLT a feature of its CQS accreditation. Indeed, it appears that it was as a result of this clarification that first sparked the ambulance chasers into action.

The question one should ask is that if a decision had been taken to refer a client to a tax expert what advice would have been given.  Looking at the history of changes to the SDLT legislation and the practice directions issued, it is doubtful any stamp duty advisor would  have been aware before the end of 2016, at the very earliest, that annexes could qualify for MDR. The precise time when the possibility of claiming MDR on annexes became part of general legal knowledge is unclear. It was demonstrably not before April 2016[6] and probably not for one or two years afterwards.

It is suggested that a reference within the Law Society’s Conveyancing Handbook[7] to MDR acts as evidence of widespread  knowledge  within the conveyancing industry of the availability of the relief.  However, on closer examination of the relevant parts of the commentary there is no reference to annexes. The focus of the text is very much on the purchase of multiple dwellings.

Terms of Retainer

On the subject of duty there is also the need to look at the terms of the retainer.

There are many firms who use their terms and conditions as a basis to exclude from the scope of service the provision of advice on taxation issues.

Limiting the scope of duty and making limitations clear can avoid a firm becoming liable for the clients loss.   This was recognised in the Supreme Courts decision in BPE Solicitors and another (Respondents) v Hughes-Holland (in substitution for Gabriel) (Appellant) 2016[8]   There is clearly a legal difference between a conveyancer providing information on SDLT, and submitting a SDLT return as the clients agent, and the situation whereby the conveyancer is instructed or allows him or herself to be held out as an advisor, to provide advice on SDLT.  The law is  now clear.  If the information given proves to be wrong, the conveyancer cannot be held liable for any loss arising, whereas if the client is relying on advice and the advice given is negligent, then a liability for loss arises.

Looking at this authority, the importance of making your role in relation to SDLT clear in the terms of the retainer is  critical, particularly when providing information on possible reliefs/allowances.   It should be made clear that no advice is given, it is for the client to seek specialist advice so that this can be relied upon to make an informed decision.


This then moves the analysis along to causation.   Even if the client had been advised on the potential availability of MDR, can it be shown on the balance of probability the client would have applied for it.

Arguably, based on the law as it stood then a client purchasing with an annex would not have  chosen to apply for it on the basis the nature of the transaction was one that came with no guarantee of success.  It is clear from the analysis set out above  that as a self-assessed tax, it is buyers and their representatives who are left to try to interpret these often unclear regulations.  The failure to pay the whole tax on completion on the basis of a relief that did not prima facie apply carried with it a real risk of an additional liability of an interest charge, as well as a  late payment penalty.

A further factor that could be established to demonstrate  that it was more probable than not the client  would have decided against seeking MDR is the application of capital gains tax. Whilst it is possible that principle private residence (PPR) exemption can cover a property consisting of more than one dwelling, if one of the dwellings was say let commercially then an element of a subsequent sale would not be covered by the exemption.


The claim will inevitably be couched on the basis that failure to advise ( the breach) deprived the client of the opportunity of claiming MDR.   Assuming it can be shown that but for the breach, the client would have claimed MDR, it is clear any loss must be discounted to reflect the risk that HMRC would have rejected the application.  This accords with the basic principles set out in Allied Maples v- Simmons & Simmons[9].

For the reasons set out above there is a strong argument to say the appropriate discount is 100% .  The fact is an annex was not at the time in question recognised as being suitable to qualify as a single dwelling.

It can also be argued that had the conveyancer identified the potential availability of MDR, the client would have been advised to seek accountancy and tax advice. This would have been imperative, so as to ensure that any relief could have been properly applied for. This would have involved a fee  of at least £1,500 plus VAT, which the client would have had to pay.  This is also a point that applies equally to causation.  A client faced with the prospect of incurring a sizeable fee on seeking specialist advice would  be less likely to run the financial risks of failing with a MDR application, especially when the potential  saving  is small.


The value of a MDR related claim is likely to relatively small and litigation will inevitably take place in the small claims court where there is little prospect of recovering costs.  The commercial viability of defending a claim will often be on the mind of the professional indemnity  insurer.   There may be pressure applied to settle.  The temptation should be avoided however as the claim farmer will be fuelled by the recovery and your firm could very well remain very much a target for future similar claims.


[1] Definition: claims farmer [noun] – a middleman who encourages people to make compensation claims and who then sells these claims on to a lawyer (Collins Dictionary)

[2]Finance Act 2003 Schedule 4ZA inserted by Finance Act 2016

[3] (

[4] Across paragraph 2.10A to 2.10 F. Examples were also provided in Chapter 9

[5] – https:// 5058834

[6] The decision of the Norwich County Court in Dr Victoria Ames v Ward Gethin

Archer Limited (unreported) contradicts these decisions. Judge Spencer in Ames found that

claiming MDR on annexes was a “developing area of law” and was not within the scope of

the reasonably competent solicitor in 2013.  Contrast with decisions within Hastings County Court in Mr Giulio Conte and Mrs Tracey Conte v Gaby Hardwicke (a firm) (unreported) and the Leeds County Court in Ransom v Brewer Wallace Limited (unreported) where the background to MDR as described in this article appears to have been absent.

[7] (Francis Silverman 19th edition (2012-13), 20th edition (2013-14), 21st edition (2014-15) and 22nd edition (2015-16)


[9] [1995] 1 WLR 1602

Written by David Pett (@davidpett), Director of MJP Conveyancing

Today's Conveyancer