Espalier Ventures Property (Lansdowne Road) Ltd v The Commissioners for HMRC
[2023] UKFTT 725 (TC)
Kwasi Adomako Bonsu & Anor v The Commissioners for HMRC
26 February 2024
[2024] UKFTT 158 (TC)
First-tier Tribunal
A couple bought an apartment with rights to use a shared garden. The taxman said they owed more tax because the apartment was considered residential. The couple argued that the garden made it partly non-residential. The court sided with the taxman, saying the apartment was mainly residential and the garden rights were linked to the apartment itself, not separate property.
Key Facts
- •Mr and Mrs Bonsu purchased a leasehold interest in an apartment, including a right to use a communal garden.
- •The purchase price was £750,000.
- •HMRC issued a closure notice assessing SDLT at the higher residential rates (£50,000).
- •Appellants argued that the right to use the communal garden constituted non-residential property, leading to a lower SDLT assessment.
- •The apartment building also contained commercial space.
Legal Principles
A right to use a communal garden can be an easement, not a licence.
Re Ellenborough Park [1956] Ch 131 and Mulvaney v Gough [2002] EWCA Civ 1078
Section 43(6) of the Finance Act 2003 defines the 'subject-matter' of a land transaction, encompassing the main chargeable interest and appurtenant rights.
Finance Act 2003, section 43(6)
Section 48 of the Finance Act 2003 defines 'chargeable interest' and excludes licences.
Finance Act 2003, section 48
Section 55 of the Finance Act 2003 outlines how SDLT is calculated, using Table A for residential property and Table B for non-residential or mixed property.
Finance Act 2003, section 55
Section 108 of the Finance Act 2003 defines 'linked transactions'.
Finance Act 2003, section 108
Section 116 of the Finance Act 2003 defines 'residential property', including interests or rights over land benefitting a dwelling.
Finance Act 2003, section 116
An easement is a proprietary right, appurtenant to land, conferring rights over neighbouring land.
Regency Villas Title Ltd v Diamond Resorts (Europe) Ltd [2018] UKSC 57
Outcomes
Appeal dismissed.
The main subject matter of the transaction was the leasehold interest in the apartment (residential property). The easement over the communal garden was appurtenant to the lease and therefore did not change the residential nature of the transaction. Even if considered separately, the easement itself qualifies as residential property under section 116(1)(c).