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Espalier Vs HMRC: Higher SDLT & Mixed Used Property


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Table of Content

Table of Content

The case at hand revolves around an appeal brought by Espalier Ventures Property (Lansdowne Road) Ltd. (hereafter referred to as the “Appellant”) against a decision by HM Revenue & Customs (HMRC).

This decision, dated 19 November 2020, claimed that £716,250 was due as stamp duty land tax (SDLT) in connection with the Appellant’s acquisition of a parcel of land interests on Lansdowne Road in London.

The Appellant had initially paid SDLT in the amount of £257,000, considering SDLT to be applicable at the rate provided in Table B of Section 55 of the Finance Act 2003 (FA03) based on the belief that the property was for mixed-use.

HMRC, however, determined that the applicable rate for SDLT should be determined under Table A as varied by Schedule 4ZA FA03 since the property in question was deemed wholly residential.

In this article, we will delve into the relevant legal framework, evidence, and the key issues involved in this case, ultimately leading to the determination of whether the higher rate of SDLT is applicable.

Section 42 FA03

This section charges SDLT on “land transactions,” which are defined in Section 43 FA03 as the acquisition of a chargeable interest. A chargeable interest includes an estate, interest, right, or power over any land in England.

Section 116 FA03

This section defines residential property for the purposes of SDLT. It includes buildings used or suitable for use as a dwelling, land forming part of the garden or grounds of a dwelling, or an interest in or right over land benefiting a dwelling.

Section 55(1B) FA03

This section determines the SDLT rates based on whether a transaction consists entirely of residential property or includes non-residential elements. The main subject matter of the transaction determines which SDLT rate table applies.

Paragraph 4 Schedule 4ZA FA03

This paragraph imposes higher SDLT rates on transactions exceeding £40,000 involving major interests in a single dwelling where the purchaser is a company.

Paragraph 18 Schedule 4ZA FA03

This paragraph defines a dwelling as a building or part of a building suitable for use as a single dwelling, land occupied or enjoyed with a dwelling as a garden or grounds, or land subsisting for the benefit of a dwelling.

Evidence and Factual Findings

Evidence and Factual Findings

Based on the evidence provided in this case, the following factual findings are relevant:

  • The Appellant, a real estate business, acquired three separate property interests for a total of £5,350,000 from Mr. Christopher Bodker on 14 January 2019.
  • The acquired interests include lock-up garages, a leasehold flat, and a share of the freehold in the property known as 43 Lansdowne Road.
  • The garages were physically detached from the living accommodation and were accessible only from Lansdowne Rise.
  • The garages had been in common ownership with the flat since 10 June 1960.
  • A series of Planning Permission applications proposed converting the flat and the upstairs property into a single dwelling, with the garages to be demolished.
  • The title for the flat included the right to use communal gardens.
  • The interest in the communal gardens was governed by the Town Gardens Protection Act 1863.
  • The SDLT return filed by the Appellant claimed relief as a Mixed Use Property.

The Key Issue

The main issue in this case is whether the consideration of £5,350,000 paid by the Appellant qualifies as an interest in a single dwelling, subject to the higher rate of SDLT.

Determining the Applicability of the Higher Rate

To resolve this issue, several factors need to be considered:

Nature of the Transaction

Following the principles established in Fanning v HMRC [2023] EWCA Civ 263, the nature of the transaction must be determined. It should align with the legislative intent, considering the context of the statute and its historical context.

Main Subject Matter

Under Section 43 FA03, the “main subject matter” of the transaction must be identified. If the garages and the interest in communal gardens are not independent main subjects apart from the flat, the higher Stamp Duty Land Tax (SDLT) rate will apply.

Independent Subject Matter

To establish independence, the interests in the garages and communal gardens must not be appurtenant to the flat. They should stand alone as separate subjects.

Meeting Section 116 Requirements

To apply the lower SDLT rate, one of the following criteria must be met:

  • The interest is in a “dwelling” (Section 116(1)(a) FA03).
  • The interest is in the “garden or grounds of the dwelling” (Section 116(1)(b) FA03).
  • The interest is “for the benefit of the dwelling” (Section 116(1)(c) FA03).

Appellant’s Submissions

  • The appellant argues that the court should interpret the relevant FA03 provisions purposively, considering the intended nature of the transaction and avoiding absurd results.
  • They contend that neither the garages nor the interest in the communal gardens should be considered appurtenant or pertaining to the flat, making them independent subjects not meeting the definition of a dwelling.
  • They argue that the communal garden interest is derived from the Town Gardens Protection Act 1863 (TGPA) and not appurtenant to the leasehold interest in the flat.
  • Based on these arguments, they assert that none of the gateways provided in Section 116 FA03 apply, resulting in a mixed-use transaction.

HMRC’s Submissions

HMRC's Submissions on Espalier vs HMRC
  • HMRC’s case is based on the assumption that the garages are part of the dwelling under Para 18(3) or (4) of FA03.
  • They argue that the definition of “grounds and gardens” in Para 18(3) should be determined at the effective date of transfer and include land surrounding the dwelling occupied with it.
  • HMRC claims that evidence such as common ownership, historic and future use, layout, proximity, and legal constraints supports their position that the garages are part of the dwelling.
  • They contend that the interest in the garages subsists for the benefit of the flat under Para 18(4).
  • HMRC asserts that the right to use and enjoy the communal gardens represents an easement appurtenant to the flat, making it part of the main subject matter of the transaction.
  • They reference prior cases and judgments, such as Sexton and Nael Khatoun, to support their arguments regarding the benefit of the dwelling and the interpretation of Section 116(1)(c) FA03.


In this discussion section, the Judge provides analysis and conclusion regarding the interpretation of the relevant statutory provisions and the application of Stamp Duty Land Tax (SDLT) in a specific case. Here’s a summary of the key points from this discussion:


  • HMRC had initially accepted that the garages formed part of the main subject matter of the transaction but contended that they fell within Para 18 of the Finance Act 2003 (FA03).
  • The Judge agreed with HMRC’s position and stated that there was a clear intention to develop the garages into a substantial single dwelling along with the flat, which was consistent with approved planning applications.
  • The interpretation of Para 18(3) was discussed, and it was emphasised that the garages were intended to be “occupied with the dwelling.” As a result, they were considered part of the land transaction concerning the flat and a dwelling pursuant to Para 18(3).

Communal Gardens

  • The appellant had argued that the interest in the communal gardens was not an easement appurtenant to the flat or the Freehold Share, mainly because it was derived under the Town Gardens Protection Act 1863 (TGPA).
  • The judge disagreed with the appellant’s interpretation and cited the judgment in Regency Villas. It was determined that the interest in the communal garden met the definition of an easement appurtenant to the flat and the Freehold Share.
  • The rights associated with the use of the communal garden were considered to be a legal right bestowed upon the owner and, when occupied by someone other than the owner, the occupier of the flat under the leasehold title.


In conclusion, the decision is based on the interpretation that the Garages are to be considered part of the dwelling due to the application of Para 18(3), and the rights to use and enjoy the Communal Gardens are deemed appurtenant to the Flat.

Consequently, the Appellants are liable to pay £5,350,000 in consideration for a single dwelling under Schedule 4ZA. This means that for SDLT purposes, Section 55 of the Finance Act 2003 mandates the application of Table A as adjusted, leading to a higher SDLT rate being applicable.

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Sanjay Gautam

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