VAT Director Rayner Essex
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SDLT: Mixed use plan fails on co-ordination


This advantageous treatment of mixed-use residential/non-residential properties for stamp duty land tax (SDLT) was put to the test in the recent tribunal appeal of Brandbros Ltd.

25th Jun 2021
VAT Director Rayner Essex
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Brandbros Ltd paid stamp duty of £15,000 on the purchase of a residential property including a garage, but then sought a partial refund on the basis the property had mixed-use and the non-residential SDLT rates should apply. HMRC's refusal to recognise the mixed use claim led to an online tribunal appeal in April (TC08126). 

Stamp duty land tax (SDLT) offers rates for commercial type properties and for residential type properties. When a property consists of both residential and commercial aspects, the legislation permits you to treat the whole transaction as non-residential, as the non-residential SDLT rates and bands are much more favourable.

In addition, classifying the purchase as mixed use avoids the 3% SDLT surcharge on residential properties being acquired by corporate entities.

The facts of the case

The sales brochure promoted the property as a three-bedroom property including a garage. Completion took place on 27 July 2018 and on the same day the buyer (Brandbros Ltd) issued a lease of the garage to SFEP Ltd for £2,000 per year for storage/office use. No change of use was applied for, nor were business rates applicable to the garage. The residential property was let to residential tenants unconnected with SFEP.

The taxpayer’s view was a commercial lease was granted on the effective date of the transaction, so the land should be classified as mixed-use. The garage no longer formed part of the garden or grounds of the dwelling due to its commercial use, and the change of use occurred on the same day as the property transaction.

HMRC’s view was at the time in which the property was purchased, it did not include any non-residential elements. It was sold with vacant possession with no lease in place and the lease did not change the character of the property from residential to non-residential. The garage is a building on the grounds of the property and even if the lease was accepted, the garage continued to be used for storage, the natural purpose of a garage.

Tribunal view

The conclusion of the first tier tribunal was the garage should be treated as a building in the garden of the property. As a matter of statutory interpretation, the garage is treated as residential property under FA 2003 s116 regardless of the use to which it is put. Under FA 2003 s116(1)(a) the house is treated as residential property. Also FA 2003, s116(1)(b) extends that treatment to the garden and grounds of the house, including any buildings or structures and those areas. There is no limitation in section 116(1)(b) to areas that are used for residential purposes.

The granting of the lease does not alter the classification of the property. FA 2003 states a contract for land transaction is completed by a conveyance and the conveyance sets the date of the transaction.

The FTT noted that the contract was for the property as a whole including the grounds, and there was a separate conveyance to the commercial lease that followed on the same day. That commercial lease was a separate transaction, itself a notifiable event for SDLT albeit with no SDLT liability due to the low value involved.


If it is possible to grant a lease before acquiring the property, it is still not clear as to whether that would then create the opportunity the taxpayers in this case sought to achieve: can the garage become a separate commercial space to the residence it is associated with? It may take another case to determine that question.

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Replies (5)

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By Paul Crowley
26th Jun 2021 16:04

Yet another attempt at tax evasion
Who was selling this evasion scheme?

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By Justin Bryant
28th Jun 2021 10:17

"If it is possible to grant a lease before acquiring the property, it is still not clear as to whether that would then create the opportunity the taxpayers in this case sought to achieve: can the garage become a separate commercial space to the residence it is associated with? It may take another case to determine that question."

Does the author really think that that would work to get mixed-use SDLT rates (the phrase "commercial use" does not even appear in the legislation)? It's total utter nonsense (peddled by very dodgy SDLT advisers) & I suggest that he sticks to VAT if that is his view. In any event, the judge correctly said it would have failed regardless of timing and (para 41) that he was fortified in that conclusion by referring to Swami Raghavan's decision in the application for permission to appeal in the Goodfellow case (which cannot be faulted in my view).

If I were wrong then renting the front parking bay (or garage) of my house to the grocer next door (for his delivery vans etc.) rather than to my neighbour across the road (for his big new BMW) would make all the difference re mixed-use rates, which clearly cannot be right.

PC's comment above puts things rather more succinctly of course.

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Replying to Justin Bryant:
By Justin Bryant
28th Jun 2021 16:18

"It must also be remembered, however, that commercial activity is not the test under s 116, and that commercial activity (or lack thereof) is only one potential factor in ascertaining whether a property has non-residential aspects to it."

The above extract from the link below is of course entirely correct.

Reference is also made there to the dodgy SDLT advisers as follows:

"Advertisements encouraging claims for stamp duty land tax (SDLT) refunds based on the difference in rates between properties classified as ‘mixed use’ and ‘residential’ under the Finance Act 2003 Sch 10 para 34 have become increasingly common. "

And here too:

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Replying to Justin Bryant:
Jason Croke
By Jason Croke
30th Jun 2021 15:33

The article is designed to prompt discussion. That is why it posed the question. How many MDR cases have there been with basements/extensions presented as being separate dwellings, whether you and I disapprove, doesn't seem to stop an endless stream of providers promoting such schemes.

The fact that an SDLT specialist counsel took the case and presented a spirited argument suggests a testing of the logic and the law, that is after all, what Counsel do.

Genuine question, do you think this was a one-0ff case or will there be more like it? Thanks for contributing to the thread.

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Replying to Jason Croke:
By Justin Bryant
01st Jul 2021 09:47

MDR is a different and irrelevant matter (MDR merely depends on the nature of the purported dwelling unit and so is not really a scheme as this case almost certainly was*). Also, it does not follow that a taxpayer represented by tax counsel at tribunal (or higher) has not entered into a totally hopeless dodgy tax scheme and that HMRC were right not to have charged penalties for negligence (or worse). Just look at the highly dodgy 'Working Wheels' scheme peddled by NT Advisors or the highly dodgy Root2 'Alchemy' scheme where the taxpayers were represented by counsel (based no doubt in both cases on a totally dodgy counsel opinion**). There are numerous similar examples that have been discussed here over the years. So to answer your question of course this will not be a one-off case.

This was similarly (almost certainly*) an outright dodgy SDLT scheme that had no chance of success (for the reasons stated above) unless HMRC did not enquire into it or otherwise assess it within the usual time limits.

* why else would there be such a rush to grant such a lease on completion day?

** See here litigation for negligent advice:

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