TC09626 - [2025] UKFTT 01067 (TC)

In the course of discussion in the hearing a point arose as to how to apply the test in Fiander. HMRC accepted by implication that the test was not whether the properties could be bought separately by independent purchasers but whether they could be occupied by arm’s length parties (Fiander at [48(5)], Winfield [2024] UKFTT 00734), Yeomans [2024] UKFTT 00955). However, Ms Man, and those attending the hearing having considered the point with colleagues over lunch, strongly resisted our suggestion that, in determining whether there was sufficient security and privacy, the Tribunal was able to speculate as to the terms of any tenancy or other rights of occupation that might be granted. Here the obvious uncertainty, discussed below, was as to whether the hallway was part of the Annexe, part of the Main House or communal, as is assumed to be the case for the front porch. The point also arose in the context of whether utility bills could be envisaged as being included in rent. Ms Man insisted under instructions that as Fiander required the test to be applied as at the effective date, that is Completion, there was no room to create terms of occupancy after that date.

With respect to HMRC’s position, this cannot be the case. It is not an issue in this appeal that occupiers of both properties would have access to the driveway and the porch. Both parties are therefore making assumptions about what the terms of occupation might be that cannot be said to have been decided or in some way established at Completion. Further, this Tribunal has previously considered and made assumptions about how any property might be occupied without apparently such a fundamental objection by HMRC (see for example Winfield [2024] UKFTT 00734 at [21] and [22]).

The requirement in Fiander is to look at the physical characteristics of the property at the time of completion but that does not in our view prevent, as part of applying the multifactorial test, some consideration of the realistic legal terms on which such occupancy could be granted. Indeed, in many cases without doing so the task seems impossible. For example, if we have to assume there would be no right for an occupant of the Annexe to have access over the driveway because it had never been previously granted, then any claim for MDR in these annexe type circumstances would necessarily fail unless there happened to have been a pre-existing tenancy of some kind.