Goudman-Peachey v HMRC: Redrawing the Boundaries of Mixed-Use

A recent case before the First-tier Tribunal (FTT) demonstrates an opposing assessment of ‘mixed-use’ compared to that in the Sehgal case, and makes it clear that when deciding if land is residential or non-residential, the Tribunal must carry out a holistic, evidence-driven balancing act, looking at how the land is truly used.

The Issue

A property will be treated as mixed-use for Stamp Duty Land Tax (SDLT) purposes if there are genuine, distinct elements of the property which are residential, and non-residential. If this can be shown, the mixed-use property will typically be taxed at lower non-residential rates which can lead to significant savings for buyers. 

If the parts are not sufficiently clear-cut, the position will generally be that mixed-use will not be accepted, and the residential rates of SDLT will apply. However, the boundaries were pushed in the recent Sehgal case which led to a surprising allowing of mixed-use application to a flat and a separate storage unit. 

The application of mixed-use was considered rather differently in this case, showing that evidence of use is decisive. 

The Facts

The property in this case was purchased by the Appellant and her late husband. It was a large, multi-million-pound country estate made up of a main dwelling (Woodmancote Place); two smaller dwellings; and was set within grounds of 150 acres of surrounding land. 

This land was used for deer farming, sheep grazing, maize farming, and parts were used for an offshore wind farm under commercial contracts. There were also 17 public footpaths across the estate.

Following the purchase HMRC had issued a Closure Notice assessing £477,250 additional SDLT on the basis the land was entirely residential. This was appealed by the executor of P Goudman-Peachey’s estate.

HMRC’s arguments centred on the idea that the entire 150 acres were ‘garden or grounds’ of the dwelling, and thus entirely residential. 

The appellant appealed this assertion, claiming that significant parts of the land were genuinely non-residential, and were instead used for ongoing, independent and commercial purposes at completion. Not only was there a physical separation between the dwelling and the surrounding commercial land, but the historic use and advertising of the property supported the assertion that there were sincere, separate residential and non-residential uses. 

The Decision

The FTT applied the evaluative exercise from Hyman, which confirmed that when deciding whether land forms part of the ‘garden or grounds’ of a residential dwelling for the purposes of s116(1)(b) Finance Act 2003, the Tribunal must carry out a holistic balancing exercise, not a single-factor test. They therefore allowed the appeal against HMRC’s Closure Notice and stated that the lower, non-residential rates in Table B should have applied.

What does it mean?

So, what does this all mean for an individual trying to decide if a high value residential property transaction is treated as mixed-use property for SDLT purposes? The answer has been muddied by the Sehgal decision, however, this case emphasises that the ‘entirely residential’ requirement remains a strict threshold. If any part of a property can be seen as operationally distinct, such that it is not residential, or legally separate, mixed-use treatment can be applied.

Questions about mixed-use treatment or structuring property transactions? The Tax Team at Clyde & Co can assist further.