Following recent challenges made by HMRC, the Stamp Duty Land Tax (SDLT) term ‘mixed-use’ applying to property transactions has become less clear-cut than once thought and has highlighted the importance of seeking specialist advice.

The issue begins with the standard SDLT rates for a residential purchase, which start at 0% but rise as high as 12% for consideration above £1.5 million. If the purchaser will then own more than one residential property, they are required to pay a further 3% on top of the standard SDLT rates.

‘Residential’ property is broadly defined as a dwelling or the garden or grounds that surround a dwelling. A non-residential property is that which contains no residential aspects to it; consequently, a mixed-use property is one that has both residential and non-residential features. A common example would have been a working farm – there is the residential farmhouse and the non-residential farmland.

Where the purchase is deemed non-residential or mixed-use, lower SDLT rates apply – the highest is 5% for consideration above £250,000. Significantly, the additional 3% charge does not apply.

Whilst the above appears straightforward, HMRC has identified a loophole: purchasers attaching a non-residential feature to a residential property, thus making it mixed-use, to avoid higher SDLT rates. An example is the purchase of incidental grassland that neighbours the purchased house.

HMRC has sought to combat this and recently deemed that a large residential property with parkland was not mixed-use, since the parkland was considered an amenity for the property. Most surprisingly though, HMRC has argued a house with 250 acres of working dairy farm land to be residential, rather than mixed-use. Considering the enormous uplift in SDLT, this is being challenged and we await the outcome in full to understand HMRC’s position.

Nevertheless, because HMRC is breeding uncertainty around the scope of ‘mixed-use’, tackling any issues they raise is best done with specialist advice. Such advice should be obtained sooner rather than later.

If you have any queries or concerns regarding the above, or would like advice in respect of any agricultural transactions, please contact Emma Coke on 01206 217629 to discuss.