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.
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"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.
"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.
https://www.taxadvisermagazine.com/article/stable-proposition
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: https://www.youtube.com/watch?v=9ERFXK0npgQ
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: http://www.fsl.legal/tax-negligence-disputes/alchemy-spread-betting-tax-...
My word... I know this article is 2 years old now. I didn't feel the need to comment on the article itself, but the comments are worthy of a comment!!!!!
@ Paul and Justin - this is an attempt at tax avoidance, not tax evasion... I know this is just a small point right? just semantics right?
Why such criticism of the author for merely having a different opinion? People can test/challenge whatever they want, let a judge decide.
And as for MDR, of course it is a reasonable comparison. If someone artificially manipulates the number of dwellings for the purposes of an SDLT benefit then this is directly relevant.
Thank you Jason, I found the article very useful.