A mixed use property will be taxed at the non-residential rate of SDLT which can result in huge savings and if the purchaser is a higher rate taxpayer those savings could be in the hundreds of thousands!
What is a mixed use property?
A mixed use property is a property which consists of both residential and non-residential land. The most obvious example is a shop with a flat above but this is not the only type of property which will be considered mixed use. It has recently been confirmed in a number of first tier tax tribunal decisions that there is not necessarily a requirement for commercial use in order to allow a purchaser to successfully claim that their property is mixed use.
The following have been accepted as mixed use properties:
- A house with a paddock which was not visible from the house, was registered under a separate title and was subject to a commercial grazing licence entered into on the same day as completion – Sutterwalla v HMRC
- A house with an area of land subject to a grazing agreement and a further area of woodland trust land – Withers v HMRC
- A house with an area of woodland which was separated from the house and gardens, had public footpaths running through it and was used by members of the public – Guerlain-Desai v HMRC
- A property with a bed and breakfast – Hurst v HMRC
HMRC are not giving up the fight against mixed use!
Despite HMRC’s recent defeats they are continuing to challenge claims that a property is mixed use and have perhaps been emboldened by a very recent success in the case of Holding v HMRC. In this case the property included several fields which the taxpayers argued were non-residential. The Judge did not agree stating that the fields provided amenity and benefit to the Farmhouse and as such performed a function in relation to the Farmhouse as a dwelling, the Judge’s reasons for this view were as follows:
- There was no commercial benefit of the use of the fields.
- The fields adjoined the grounds of the farmhouse and there was unhindered access to the fields from the farmhouse and paddocks.
- The fields were available to be used by the vendors.
- The fields added to the rural character of the property.
What could allow a mixed use claim to be made?
There must be a clear distinction between the residential property (the house and gardens) and the non-residential property. The checklist below sets out some examples of what would constitute non-residential land:
- Land which has a commercial use for example, a grazing licence or some other commercial agreement for use of the land;
- Large areas of land which are not necessary for the reasonable enjoyment of the residential dwelling;
- Land which is physically separate from the residential dwelling, for example land which is separated by a road or public footpath;
- Land which contains rights of way and/or public footpaths;
- Land which is not visible from the house and gardens.
What should I do before I make a mixed use claim?
Whether a property is mixed use is not only an important distinction but a complex one and it is crucial that you seek specialist advice before making a claim.
Relatus are SDLT specialists and we can advise whether your property will meet the criteria for a mixed use property allowing you to pay a lower amount of SDLT.
If you are considering purchasing a property with mixed-use potential, or if you purchased a property in the last 4 years and believe it should have been classed as mixed use, speak to the team at Relatus to see how we can help.
