Brandbros Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 17 May 2021 |
| Neutral Citation | [2021] UKFTT 157 (TC) |
| Court | First Tier Tribunal (Tax Chamber) |
[2021] UKFTT 157 (TC)
Tracey Bowler
Mr Patrick Cannon, Counsel, instructed by Cornerstone Tax Ltd appeared for the appellant.
Mr Pirimi McDougall-Moore, litigator of HM Revenue and Customs' Solicitor's Office, appeared for the respondents.
Stamp Duty Land Tax (SDLT) – Commercial lease on part of property granted on date of completion – Did this establish mixed-use – FA 2003, s. 116(1) – No – Appeal dismissed.
In dismissing an appeal for the application of non-residential rates of tax, the First-Tier Tribunal (“FTT”) held in Brandbros Ltd [2021] TC 08126 that the grant of a commercial lease on part of a property on the same day as completion did not establish mixed use.
The appellant company purchased a property in London on 27 July 2018. Later on the same day, it granted a commercial lease on the garage at the rear of the property. Having initially filed a land-transaction return on the basis that the property was residential and paid tax according to Table A in FA 2003, s. 55, the appellant later amended the return to claim the lower non-residential rates of Table B, which it claimed were applicable by virtue of the lease on the garage. Following a review, HMRC refused to accept the amendment and the appellant company appealed to the Tribunal.
The lease was granted on the same day (which was a Friday) as completion, but at a later time. The tenants did not begin to use the garage for storage, as had been the intention, until the following week.
FA 2003, s. 116(1)(a) provides that “residential property” means “a building that is used or suitable for use as a dwelling or is in the process of being constructed or adapted for such use” and s. 116(1)(b) adds land that is or forms part of the garden or grounds of such a building (including buildings or structures on such land) to the definition. There was no dispute between the parties that the garage was part of the grounds of the property.
The appellant company argued that the effective date in relation to a land transaction is the date of completion, not the time of completion. By the grant of the lease on the garage, the property became mixed-use on that date and remained such. The scintilla temporis between completion of the purchase and grant of the lease should be rejected on the authority of Abbey National BS v Cann [1990] 1 All ER 1085. In Hyman v R & C Commrs [2021] BTC 515, the Upper Tribunal had confirmed that land would not constitute grounds to the extent that it was used for a separate, commercial, purpose.
On behalf of HMRC it was argued that at the time of completion, the property did not include any non-residential elements. In any event, the lease did not change the character of the property. The garage was a building on the grounds of the property and the use to which it was put was irrelevant and insufficient to alter the nature of the interest acquired by the appellant, which was purely residential.
The Tribunal was satisfied that the garage should be treated as a building or structure in the grounds or garden of the property (this was not in dispute). As a matter of statutory interpretation, therefore, the garage fell to be treated as residential property under FA 2003, s. 116, regardless of the use to which it was put (author's emphasis). There was no limitation in FA 2003, s. 116(1)(b) to areas that were used for residential purposes.
Although in Hyman, the FTT had commented that land would not constitute grounds to the extent that it was used for a separate, e.g. commercial, purpose, and would not then be occupied with the residence but be the premises on which a business was conducted, the Tribunal in this case was fortified in its conclusion by the decision made by Judge Raghavan in the application for permission to appeal from the FTT decision in Goodfellow [2020] TC 07507 that there was no limitation of FA 2003, s. 116(1)(b) by reference to use.
In any event, even if use of the garage should be taken into account, SDLT was a tax on transactions. FA 2003, s. 44, which provided that the effective date of a transaction was the date of completion (unless there was prior substantial performance) had to be interpreted in the context of the operation and design of SDLT. To argue, as counsel for the appellant had done, that it had to be applied by reference to the characteristics of the property at the end of the completion date was to ignore the transactional nature of SDLT. The transaction was the contract for purchase, the subject-matter of which at the time of completion was wholly residential. No lease had been granted over the garage until a later time. The grant of that lease was itself a separate land transaction.
The appeal therefore fell to be dismissed.
Although this is yet another case of failure to establish mixed use and hence apply the lower rates of Table B, it nevertheless throws up a novel issue.
It is the first time, to the author's knowledge, that a Tribunal has unequivocally found that if land, or a building or structure on land, forms part of the garden or grounds of a house, then the use to which it may be put is irrelevant in the context of the meaning of “residential property” under FA 2003, s. 116. The line of reasoning followed by FTTs hitherto, whether implicitly or explicitly, has been that use is relevant, as admitted in this case by reference to Goodfellow.
The Upper Tribunal decision in Hyman, called in aid by both parties, is of no help, as the sole issue that it had to decide was whether land had to be needed for the reasonable enjoyment of the house for it to constitute the garden or grounds – the answer being no. It was not asked to, and did not, comment on...
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Gibson
...house and stood on land that was indisputably residential. The use of its upper floor as an office was therefore irrelevant (Brandbros[2021] TC 08126) as was the classification of the land for planning purposes as agricultural. The MDR issue FA 2003, s. 58D provides that MDR may only be cla......
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Ladson Preston Ltd and Another
...taking possession should not be taken into account in determining the nature of the land acquired (reliance is placed on Brandbros Ltd [2021] TC 08126 at [47]). [64] In any case, site clearance, bore hole drilling and utilities work were not part of the process of construction of the dwelli......
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Harjono and Another
...the time of completion. [44] This is an argument which he has run in a number of cases including Kozlowski, Suterwalla and Brandbros Ltd[2021] TC 08126 (“Brandbros”). In Kozlowski and Brandbros, Judge McKeever and Judge Bowler respectively, found against him. In Suterwalla, Judge Rankin fou......
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Kozlowski
...starting point must be to consider the provisions of Finance Act 2003 itself and the cases on that Act. [46] The facts in Brandbros Ltd[2021] TC 08126 are very similar to those in the present case. The First Tier Tribunal held that as SDLT is a transactional tax, one must look at the subjec......