When buying property in England, Stamp Duty Land Tax (SDLT) can be a significant cost. One important distinction is whether a property is treated as purely residential or as mixed use.
A mixed use property includes both residential and non residential elements. This could include a house with farmland, commercial buildings or land used for a genuine non residential purpose. Mixed use properties are subject to lower SDLT rates than residential properties, which can result in substantial tax savings.
However, HMRC continues to closely scrutinise claims for mixed use treatment.
This was highlighted in the recent case of HMRC v Christopher Brzezicki. Mr Brzezicki purchased a large house together with a fishing stream and an island and argued that the transaction qualified as mixed use. Although the First tier Tribunal initially agreed, the Upper Tribunal overturned the decision and ruled that the entire property was residential.
The Tribunal found that the stream and island formed part of the property’s “grounds” and were therefore residential in nature, rather than genuinely non residential land. While trout bred naturally in the stream, there was no active commercial operation in place at the time of purchase.
The decision is a useful reminder that unusual features such as woodland, streams, paddocks or separate parcels of land will not automatically qualify a property for mixed use SDLT treatment. The key consideration is how the land is actually being used and whether it would ordinarily be regarded as part of the home.
For buyers, getting the classification wrong can lead to unexpected tax liabilities, interest and penalties if HMRC successfully challenges the SDLT position.
At A&C Chartered Accountants, we can help review property transactions, assess whether mixed use treatment is appropriate and ensure SDLT claims are properly supported before completion.