Bonsu and Another
| Jurisdiction | UK Non-devolved |
| Judgment Date | 26 February 2024 |
| Neutral Citation | [2024] UKFTT 158 (TC) |
| Court | First-tier Tribunal (Tax Chamber) |
[2024] UKFTT 158 (TC)
Tribunal Judge Richard Chapman KC
First-Tier Tribunal (Tax Chamber)
Stamp duty land tax (SDLT) – Grant of lease – Easement over communal garden as part of lease – Claim for application of non-residential rates of tax – Was easement main subject-matter of transaction? – No – Were there two transactions? – No – Was easement mixed-use land? – No –Finance Act 2003 (FA 2003), s. 43, 55, 116 – Appeal dismissed
In Bonsu & Anor [2024] TC 09084, dismissing the appeal, the First-tier Tribunal (FTT) found that the grant of a lease carrying with it the right to use a communal garden was a single land transaction involving wholly residential property
The appellants, Mr and Mrs Bonsu, lived in one of the apartments in the building known as Oyster Walk in London. The building was mainly residential but its ground floor included a commercial space.
Acting as trustees of a deed of settlement they purchased the remaining term of their lease on their apartment building in March 2020. The lease carried with it the right to use communal areas including a garden.
Having initially paid SDLT at the higher rates for residential property applicable to additional dwellings, they later amended their return to apply the non-residential rates of tax on the basis that the right to use the garden was a non-residential chargeable interest.
HMRC opened an enquiry into the amended return at the end of which it issued a closure notice restoring the original rates. Mr and Mrs Bonsu appealed to the Tribunal.
On their behalf it was argued that:
- The right to use the garden was an easement, which was a non-exempt chargeable interest and was in fact the main subject-matter of the transaction. The garden was mixed-use land as it benefited both commercial and residential property.
- Further or alternatively, the easement was a chargeable interest in its own right and the subject-matter of the transaction was therefore the leasehold interest and the easement. As such, there were two land transactions, which were linked transactions. Since one of those transactions was over mixed-use land, the non-residential rates of tax applied.
It was agreed that an easement was a chargeable interest. However, FA 2003, s. 43(6) provided that the subject-matter of a land transaction is the chargeable interest acquired (which is then the “main subject-matter”) “together with any interest or right appurtenant or pertaining to it that is acquired with it.”
Its natural construction is one that envisages that there is a single main subject-matter. Despite the appellants’ arguments to the contrary, interests or rights appurtenant or pertaining to the main subject-matter could include a chargeable interest. The words “any interest or right” were broad enough to include a chargeable interest and the appellants’ proposed limitation of it to include conveyancing matters only would be inconsistent with that broad scope.
Nor was the easement being ignored by being identified as appurtenant to the main subject-matter, the leasehold interest. The “relevant land” for applying rates of tax under FA 2003, s. 55 was the main subject-matter rather than the subject-matter as a whole or any other part of the subject-matter. The leasehold interest was clearly the main subject-matter of the transaction, and the easement was clearly appurtenant or pertaining to it. As explained by Lord Briggs in Regency Villas Title Ltd v Diamond Resorts (Europe) Ltd [2018] UKSC 57, the very nature of an easement was that it was appurtenant to a dominant tenement. Here, the dominant tenement was the property by virtue of the lease and the easement was granted within the lease.
Furthermore, although the Tribunal was not bound by Sexton, which also involved the right to use a communal garden granted to leaseholders under the lease, its reasoning here was consistent with that decision, as also with that in Espalier Ventures Property (Lansdowne Road) Ltd, which had both come to the same conclusion.
Since the main subject-matter of the transaction was the lease, and the lease was an interest over the land, being the building, which was used or suitable for use as a dwelling, the correct rates of tax were those applicable to residential property.
The only contract was for the transfer of the lease and the only transfer was the lease itself. The right to the easement was one of the rights that was transferred with the transfer of the lease and was not acquired independently. For there to be linked transactions, there had in any case to be a single scheme, arrangement or series of transactions of which the transactions were a part. Here, the only transactions related to the land itself.
Although it was not necessary to the decision whether or not the easement was itself residential property, the Tribunal would make a determination on the issue in case its analysis on the earlier points was wrong.
The easement was residential property, for three reasons.
First, under FA 2003, s. 116(1)(c), the definition of residential property included “an interest in or over land that subsists for the benefit of a building [used or suitable for use as a dwelling]”. The argument for the appellants had been that the definition was implicitly limited to a particular dwelling rather than including a right communal to more than one dwelling. Per contra, there was no such implication, which would be inconsistent with the clear wording of s. 116(1)(c), which contained no limiting words.
Second, whilst the garden was used by others within the building (including the commercial unit), s. 116(1)(c) dealt with the interest in or right over land rather than the use of the land. The interest or right acquired by Mr and Mrs Bonsu was the easement granted by the lease. Other leaseholders obtained their rights from another source.
Third, it was common ground that the property was residential property, so the fact that the easement subsisted for the benefit of the property was sufficient to make the easement residential property also.
The appeal would be dismissed.
The decision is entirely in line with Sexton and Espalier, as the Tribunal Judge said and, indeed, is also in line with Khatoun. There seems little scope for an appeal.
Comment by Zigurds G Kronbergs, Senior Tax Writer, Croner-i Ltd
Mr Patrick Cannon of counsel appeared for the appellant
Mr Christopher Thompson-Jones, litigator of HM Revenue and Customs' Solicitor's Office appeared for the respondents
[1] This is an appeal against a closure notice dated 17 January 2022 issued against the appellants, Mr and Mrs Bonsu, in respect of stamp duty land tax (“SDLT”) relating to the purchase of a leasehold interest in Apartment 140, Oyster Wharf, 18 Lombard Road, London (“the Property”). The central question is as to whether the grant within the lease of a right to use a communal garden meant, in the circumstances of the case, that the acquisition was of mixed residential and non-residential land chargeable to SDLT at the rates applicable to non-residential or mixed land (as contended for by Mr and Mrs Bonsu) or at the rates applicable to residential land (as contended for by HMRC).
[2] For completeness, I note that the Property was purchased by Mr and Mrs Bonsu in their capacity as trustees of a deed of settlement made on 1 October 2019 and named “The KB Trust 2019” (“the Trust”). There is no dispute that Mr and Mrs Bonsu are to be treated as the purchasers of the Property for SDLT purposes by virtue of sections 10 to 13 of the Finance Act 2003 (“the 2003 Act”) [Croner-i note: FA 2003, Sch. 16, para. 4].
[3] The facts were undisputed. Mr Bonsu provided a very short witness statement, was called to give oral evidence, and was asked one supplementary question by Mr Cannon. Mr Thompson-Jones did not ask any questions in cross-examination. I therefore make the following findings of fact upon the basis of Mr Bonsu's unchallenged evidence and the documents to which I was referred. In doing so, I bear in mind that (as rightly agreed by the parties) the burden of proof is upon Mr and Mrs Bonsu and that the standard of proof is that of the balance of probabilities.
[4] The Trust purchased the remaining term of the leasehold interest in the Property (“the Lease”) pursuant to an agreement dated 28 February 2020 for the sum of £750,000. The purchase was completed by a transfer dated 10 March 2020. Mr and Mrs Bonsu live at the Property.
[5] The Lease is dated 20 April 2005 and includes the following terms:
Particulars
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The Demised Premises. The fifth floor Dwelling known as Plot Number 108 more particularly described in the Third Schedule.
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1. Definitions
In this Deed unless the context otherwise requires:
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“the Garden...
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