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I use one of our bedrooms as an office. Can I save stamp duty land tax?

/ 11 February 2020

Andrew Levene

If you have acquired a property which comprises a mix of residential and non-residential accommodation, the non-residential stamp duty land tax (SDLT) rates apply. Our earlier article on SDLT has also explored this.

The non-residential rates will normally give a lower SDLT bill than the residential rates.  The classic example is the purchase of a shop with flats above. So we are sometimes asked whether use of a residential property partly as an office is sufficient for the non-residential rates to apply.

This was the point at issue in the recent First-tier Tribunal case of Goodfellow v HMRC. The Goodfellows acquired a property “described in the land agent’s particulars as a ‘fantastic family home set in about 4.5 acres within the sought after New Forest National Park’ with six bedrooms, gardens, swimming pool, garaging, stable yard and paddocks.”

The garage was detached from the house. Above the garage there was a large room connected to the house by a covered walkway. Both the vendor and the Goodfellows used this room as an office.  The stable yard and paddocks were let to a neighbour for grazing horses for a nominal rent of £1 per month.

The original SDLT return submitted by the Goodfellows’ solicitor on acquisition treated the acquisition as residential. However, subsequently the Goodfellows claimed that the office and paddocks were non-residential so that the non-residential SDLT rates applied.

The gist of the Tribunal’s response: “Pull the other one.” More precisely, it said that “the arguments … seemed to us artificial, strained and contrary to common sense.”

Regarding the office, the Tribunal said this was connected to the house, had its own bathroom and could be used as a guest room or a games room. It was no different to someone who uses a spare room or even dining room table as an office.

Regarding the paddocks, the Tribunal said that they clearly formed a part of the house’s grounds and there was no evidence of commercial exploitation. They were also residential.

The Goodfellows lost their case.

On one point we do have some sympathy for them.  In his judgement the Tribunal judge said that “the [original] SDLT return was made on the basis that the property was residential … We infer that the solicitors so advised their clients.”  In practice, in our experience, many solicitors tend to focus on conveyancing and are not always so good at spotting when SDLT reliefs may apply.

Scenarios where we see reliefs being missed are multiple dwellings relief for houses with an annexe, granny flat or a cottage in the grounds or where several dwellings are bought in one transaction, as well as more specialist reliefs where properties are bought from a deceased person’s estate.  So it is worth checking with a tax adviser in more complex cases whether non-residential rates or relief for multiple dwellings and other residential reliefs can apply.

For more information on SDLT and other property taxes, please get in touch with your usual BKL contact or use our enquiry form.

This article was quoted by Estate Agent Today in their article Nice Try! HMRC challenge stops bid to win stamp duty discount.

Andrew Levene

Director of Property Taxes

T +44 (0)20 8922 9394
E andrew.levene@bkl.co.uk

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