SDLT ON MEWS PROPERTY WITH GARAGE USED AS OFFICE.

SDLT ON MEWS PROPERTY WITH GARAGE USED AS OFFICE.

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Hi all,

I'm looking for a property to buy in London as investment and I found an interesting property with an unusual configuration:

it is a mews house with the classic garage  but the garage is not internally connected with the house, it has separate access and it is rented out to an EU company in the aviation sector that use this office space to meet the UK potential customers.

The residential part of the mews is vacant.

I understand the garage is not registered for business rate, simply the current owner had recently the opportunity to rent it out as office to this company that was looking for a representative office in this area.

My question: it is not clear if I'm going to buy this property which SDLT I'm going to pay.

I think the property should be considered mixed use not residential also because I have to buy the property with the commercial lease in place (3 year lease). I will put on the rental market the resident part of the house after the acquisition.

What do you think about ? Could HMRC challenges the mixed use ?

I will enquire a solicitor of course regarding this matter but I would like your opinion as it is a very preliminary stage. Thank you.

Marc

 

 

 

 

Replies (8)

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By FactChecker
11th Feb 2024 19:24

You asked for opinions ... well mine is that you're going to have a hard time convincing HMRC that "the property should be considered mixed use not residential".

If you look at their internal Manuals you'll find:
"'Residential property’ is defined in s116 as meaning ... a building that is used or suitable for use as a dwelling".

Note the phrase 'or is suitable for', which this patently is - given that is what it was before the current owner rented it out.

A quite separate question would be what is in the Lease (and has the non-residential usage been registered with the Council)?

These, and other, questions would be best directed at a relevant solicitor ... but, back to my opinion, I'd run a mile in the opposite direction.

Thanks (3)
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By David Ex
11th Feb 2024 19:27

My opinion is that you should speak to an SDLT specialist now.

Possibly the same lawyer you were going to speak to last April about your UK LLP.

https://www.accountingweb.co.uk/any-answers/residential-property-acquisi...

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Replying to David Ex:
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By FactChecker
11th Feb 2024 19:38

Doesn't appear to have twigged that 'investment' (particularly on the scale of a Mews house presumably in Mayfair or some such) is something for which you seek professional advice ... unless you treat it all as a gamble ('just the luck of the draw'), in which case you don't even need random opinions - just make the bet!

Thanks (3)
VAT
By Jason Croke
12th Feb 2024 07:04

Lease for garage comes across as contrived....no business rates for example.

OP you need to get proper legal advice, the lawyer will need to see the plans/layout, is the garage just a garage with a desk in it or has it been fitted out as an office, is the garage attached to the mews, what do the deeds say about selling the garage separate from the house, etc.

Thanks (1)
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By Justin Bryant
12th Feb 2024 09:22

Sounds not dissimilar to this, which I understand has been recently heard at the UT and that the taxpayer will almost certainly lose (as per my comments there):
https://www.accountingweb.co.uk/any-answers/another-interesting-sdlt-sch...

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Replying to Justin Bryant:
VAT
By Jason Croke
12th Feb 2024 10:00

I think the OP is trying to do the same as Thomas Kozlowski with the whole "house and commercial garage" argument. The Tribunals concluded whether there was a lease in place before or after acquisition, the garage is part of the house.

https://www.bailii.org/uk/cases/UKFTT/TC/2023/TC08902.pdf

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Replying to Jason Croke:
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By Justin Bryant
12th Feb 2024 10:27

Yes, but it's basically the same nonsense argument i.e. misusing the word "commercial" for a lease when the relevant rented bit of the property remains suitable for use as a dwelling notwithstanding (including such a garage under s116(b) FA 2003).

Thanks (1)
paddle steamer
By DJKL
12th Feb 2024 11:40

Presume garage has its own toilets otherwise somewhat inconvenient to use as an office.

I would be very concerned about the current use without planning and presumably warrants and a completion re the garage, I suspect any insurance will turn out to be invalid in the event of a serious claim, for instance does it even have an EPC or an EIHR, what about a Legionnaires test, how metered, does it have gas heating etc?

If I were buying I would value as a mews with a garage all as one residential property, any distinct rental stream re the garage used as an office being ignored.

Caveat Emptor

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