Stamp Duty Land Tax on “mixed use” properties

Stamp Duty Land Tax is payable by the buyer of residential and commercial property, the amount of tax being assessed on the total purchase price. Generally, the rate of tax on residential property is higher than on commercial property. A property which has “mixed use” – a mixture of residential and commercial – is charged at the lower commercial rate. It is therefore important to establish what is meant by mixed use.

The recent case of Myles-Till v HMRC provided some guidance. The tax payer purchased a residential property with an adjoining grass paddock and assessed the Stamp Duty Land Tax (SDLT) at the lower rate for mixed use. HMRC argued before the First Tier Tribunal that the paddock was part of the grounds of the residence and that the residential rate of SDLT should apply.

The tax payer and HMRC put forward separate tests to determine whether the paddock was to be treated as residential or non-residential. Both were rejected by the Tribunal which came to the conclusion that, for the paddock to be treated as non-residential (and therefore separate from the residence) it must have a stand-alone function, i.e. a commercial use or an agricultural enterprise quite separate from the residence. In this particular case, there was no stand-alone function and no physical barrier between the residence and the paddock. The paddock was therefore treated as part of the residence and SDLT at the higher rate was to be paid.

Toby Pound is a former partner and now works as a consultant solicitor solicitor specialising in agricultural law at Barker Gotelee Solicitors in Suffolk.

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