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Mixed SDLT Rates Did Not Apply To Property Purchase Where Lease Granted Over Garage on Same Day

  • The First-tier Tribunal have confirmed SDLT is a ‘transactional tax’ and that as such, granting a commercial lease of the garage of a residential property on the same day as (but following) the purchase of the property, did not entitle the tax payer to a refund of SDLT paid (Brandbros Ltd v HMRC [2021] UKFTT 157 (TC) (17 May 2021)).
  • The tax payer’s argument centred around the fact that as a result of the grant of the commercial lease, by the end of the ‘effective date’ the property would be classified as ‘mixed use’.
  • SDLT is payable per transaction. As such granting a commercial lease of part of a property had no effect on the SDLT payable in relation to the initial transaction, despite the fact that both transactions occurred on the same day
  • Further, it was held that the fact that the garden and grounds of a dwelling (and any buildings thereon) are residential (as per section 116(1)(b) of Finance Act 2003) is not limited to areas used for residential purposes.
  • Going forward, where the grounds of a residential property are used for a commercial purpose, careful consideration will need to be given to the SDLT position. The significance of this decision will likely be tested in the coming years, with the increased use of outdoor ‘home office’ spaces, as a consequence of the Covid-19 Pandemic.