CheckLists.Tax (beta)
L2. Acquisition of land
STAMP DUTY LAND TAX
Residential or non-residential rates
- Non-residential rates apply if any part of the relevant land is non-residential
No apportionment
- "It follows from s55(1C) that where linked transactions contain a mixture of residential and non-residential land the non-residential rates will be applicable to each of the linked transactions. There is no apportionment of residential/non-residential rates." (SDLTM00360)
Legislation:
Cases:
HMRC manuals: SDLTM00360 - Scope: what is chargeable: land transactions: Residential and non-residential – relevant land;
Commentary:
See also:
- Building or part that is used as a dwelling
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Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
- Suitable for use as a dwelling
Utilities
- Lack of access to utilities (boiler and fuse box) did not mean properties were not separate dwellings in Yeomans (§50 - 51).
Privacy and security
- What is required is a degree of privacy and security, not absolute (Packman, §51).
- Doors and windows all lockable usually sufficient (Packman, §53).
- Glazed double doors connecting annex to main property did not provide sufficient privacy in Shine Business (§38).
- Privacy not considered particularly telling when weighed against other features in Yeomans (§49).
Historical use
- Carries less/little weight following renovation
Legal restrictions
- In Fitzgerald, a planning restriction prevented an annexe from being use for any purpose other than as ancillary to the main dwelling.
"[55] We do not consider that it is appropriate for this Tribunal to effectively disregard the legal limitations placed on the use of the Annexe by the competent authority. The Annexe only came into being on the basis that it would not be used as a separate dwelling and the Tribunal ought to give effect to that position."
- In Ridgway commercial use was restricted by planning law and residential use was restricted by the lease. UT held it had to be suitable for a use: "In the present case, where the legal restrictions are effectively inconsistent, it is the physical attributes which are dominant" (§71).
- Given that it is the suitability of the building, not the interest in the building, that is being considered, restrictions in the lease would appear irrelevant.
- Planning restrictions are relevant but not determinative (Tretyakov - planning permission for ground floor was for light industrial use, but it was held to be part of the dwelling).
- HMRC suggest that planning restrictions not permitting use for substantial parts of the year may prevent a building being suitable for use as a dwelling (SDLTM00380).
Extent of the dwelling
- In Tretyakov a ground floor that had previously been used for commercial purposes, but renovated and which was not separated from the upper floors, which were a dwelling, formed part of that dwelling
Legislation:
Cases:
Packman v. HMRC [2024] UKFTT 954 (TC), Judge Rudolf KC;
Shine Business ltd v. HMRC [2024] UKFTT 894 (TC), Judge Brooks;
Yeomans v. HMRC [2024] UKFTT 955 (TC), Judge Hyde;
Tretyakov v. HMRC [2024] UKFTT 1144 (TC), Judge Vos;
HMRC v. Ridgway [2024] UKUT 36 (TCC), Judges Cannan and Tilakapala;
Fitzgerald v. HMRC [2025] UKFTT 89 (TC), Judge Frost;
HMRC manuals: SDLTM00380 - Scope: what is chargeable: land transactions: Residential Property – Used as a dwelling or suitable for use as a dwelling;
Commentary:
See also:
- In the process of being constructed or adapted for use as a dwelling
General rule
- A building/part of a building is residential property if it is in the process of being constructed or adapted for use as a dwelling (FA 2003, s.116(1)(a)).
- This is the only category where intended or anticipated use is relevant (SDLTM00400).
- Planning permission is a strong indicator of what the building is to be used for (SDLTM00400; Ladson, §43).
- Assessment is of the chargeable interest at the time it is acquired (Ladson, §63), but query the position if a charge arises on substantial performance.
"In the process"
- The physical process of construction or adaptation must be underway.
- Obtaining planning permission alone is not sufficient (SDLTM00400; Ladson §44).
- Preparatory works such as demolition of previous buildings, site preparation are not sufficient - they are construction works, but not works constructing the building (SDLTM00400; Ladson, §46).
- HMRC say that the process of construction begins when "building works on top of the foundations have begun" (SDLTM00400).
- Note that s.116(1)(a) says that "a building" is residential if it is in the process of being constructed.
- Does not say 'the land on which such a building is being constructed' is residential.
- This suggests that there must actually be something that can be described as a building.
- "[38] ... However, in our judgment, a “building” can only be said to be “in the process of being constructed” if there is some physical manifestation of what is ultimately to become that “building”. Without such a physical manifestation, there might well be an intention to construct a future building, perhaps even a firm intention, but no building that is in the process of being constructed." (Ladson).
- In Ladson, boreholes that formed part of the initial groundworks design and investigation did not form part of the proposed building or its foundations and were not a physical manifestation of the building (§§55 - 58).
Objective not subjective test
- "[30] ... However, the architecture of the tax suggests that it is intended to be capable of straightforward application with liability not depending on a detailed factual enquiry on matters that might be uncertain such as relevant persons’ subjective intentions as to the future use of the land." (Ladson).
Legislation: FA 2003, s.116;
Cases: Ladson Preston Ltd v. HMRC [2022] UKUT 301 (TCC), Judges Richards and Ramshaw;
HMRC manuals: SDLTM00400 - Scope: what is chargeable: land transactions: Residential Property– Dwellings (Constructed or Adapted);
Commentary:
See also:
- Garden
- The following p
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
- Grounds
General
- Statute requires classification of land at completion (Brzezicki, §35, 72).
- "Next, we consider the character and use of the land at completion." (§72).
- Grounds "of" a dwelling shows there must be a connection but does not spell out criteria (Hyman, §33).
- Ordinary meaning:
- "land attached to or surrounding a house which is occupied with the house and available to the owners for their use. That inquiry in broad terms requires consideration of physical layout, access and title, the nature and use of the land, and the character of the property as a whole." (Brzezicki, §69).
- The following principles were approved in Suterwalla (§18):
(1) Common ownership is necessary but sufficient.
(2) There must be a connection between the grounds and the dwelling.
(3) The grounds should be adjacent to or surround the dwelling.
(4) Not limited to what is required for reasonable enjoyment of the dwelling.
(5) Accessibility is relevant, but it is not necessary that the land be accessible from the dwelling or, indeed, be accessible at all.
(6) Privacy and security are relevant.
- But other people having rights over the land do not prevent it being grounds, even if they are burdensome.
- There is a spectrum. A right of way does not stop land being grounds. Separate use by a third party for farming generally will mean it is not grounds (and see Faiers, §44(9)).
- Unused land can form part of the grounds (Faiers, §44).
- Difficult access to the land does not prevent it being grounds (Brzezicki, §71).
Functional relationship
- Must be functionally an appendage to the dwelling rather than having a self-standing function (Myles-Till, §44).
- There must be a "functional relationship" beyond the fact that they were purchased together (Sloss, §88).
- Use or function of the adjoining land must support the use of the building as a dwelling (Withers, §153).
Adjacent/contiguous
- "Contiguity is important, grounds should be adjacent to or surround the dwelling" (Sutterwalla, §18).
- "contiguity speaks to the contested land being adjacent to other land under common ownership. So, if there was other land dividing the two which was owed by someone else, the requirement might not be met" (Brzezicki, §51).
- Physical barriers such as hedges, fences or a stream does not mean that land on the other side of the separation is not contiguous (Brzezicki, §49 - 53, 70).
- Some lack of contiguity may be consistent with land being grounds:
"[57] That contiguity is not determinative must also be right as a matter of principle. It is easily possible to envisage situations where the relevant land is separated from the dwelling or other parts of its grounds by (for instance) a public path or lane which belongs to someone else or is in public ownership which renders the relevant land non-contiguous yet where the separated land may still fairly be described as grounds of the dwelling." (Brzezicki, §57).
Commercial use
- Fact that land is used commercially is not decisive, but is a factor (Harjono, §69; Brzezicki, §43).
- Some level of intrusion into/alternative use of an area of land will be tolerated before it no longer forms part of grounds (Brzezicki, §43).
- Future suitability for use commerciality irrelevant if there is no commercial activity at completion (Brzezicki, §41).
Examples (grounds)
- Use of a paddock to graze a horse was consistent with use of the land as grounds in Harjono (§93).
- Fields that a local farmer mowed for free because owners wanted fields kept looked after (Holding, §39; Modha §21).
- Fields in close proximity to and visible from house that were moved under licence were part of grounds in Lazaridis.
- Carrier stream and island not in commercial use were grounds in Brzezicki, (§83).
Examples (not grounds)
- Paddock separated by a hedge withonly a small gate and which could not be seen from the house (Suterwalla).
- Land used for deer farming, sheep grazing, maize growing and with public footpaths not residential in (Goudman-Peachey, §142).
- Large area of pasture that neighbouring farmer was allowed to graze for no payment not grounds (Sloss).
- Grazing land that farmer paid to graze sheep on + woodlands not grounds in Withers.
Legislation:
Cases:
Myles-Till v HMRC [2020] UKFTT 127 (TC);
Hyman v. HMRC [2021] UKUT 68 (TCC);
Sloss v Revenue Scotland [2021] FTSTC 1;
Withers v HMRC [2022] UKFTT 433 (TC);
Faiers v HMRC [2023] UKFTT 297 (TC);
Modha v HMRC [2023] UKFTT 783 (TC);
HMRC v. Suterwalla [2024] UKUT 188 (TCC), Judges Sinfield and Greenbank;
Harjono and another v HMRC [2024] UKFTT 228 (TCC);
Lynch and another v HMRC [2024] UKFTT 350 (TC);
Lazaridis v. HMRC [2024] UKFTT 925 (TC), Judge Gauke;
Goudman-Peachey v. HMRC [2025] UKFTT 1402 (TC), Judge Manyarara;
HMRC v. Brzezicki [2026] UKUT 125 (TCC), Judges Raghavan and Baldwin;
HMRC manuals:
Commentary:
See also:
Pre-completion events
- Assignment of purchase contract (potential for two SDLT charges unless relief claimed)
- Where there is an assignment of rights, there can be two SDLT transactions.
- "[95] This means that schedule 2A imposes a double charge to tax: once on the Company by reference to the actual purchase and a further charge on Mr Goldsmith by reference to the notional land transaction. The SDLT would be the same on each transaction and the EDT is also the same." (G Goldsmith Limited)
- Relief can be claimed, but it must be claimed (Sch 2A, para 15).
Legislation:
Cases: G Goldsmith Limited v. HMRC [2024] UKFTT 927 (TC);
HMRC manuals:
Commentary:
See also:
Transactions part of a scheme: s.75A
- Compare tax payable on scheme transactions to tax payable on notional transaction
The basic rule
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Scheme transactions
- Scheme transactions are transactions, including the disposal and acquisition, "involved in connection with" the disposal and acquisition (s.75A(1)).
- Involved in connection with is a "very broad" phrase (Tower One, §113).
- On the facts of Tower One, it included a share sale that was included solely to facilitate a hoped for corporation tax benefit.
- "While it is the case that the Lease could have found its way into the Appellant's hands without the sale of the shares in B64, that is not the test. The scheme actually implemented had the share sale as an important component of the plan which vested the Lease in the Appellant." (§113).
- Transactions that "were always intended to operate together would be seen as scheme transactions" (Murphy, §114).
Identifying V
- Changing partners: in Brindleyplace Holdings, the transfer was made by a partnership. FTT decided that V should be identified based on partners on the date of the notional transaction, rather than who owned the land interest at the start of the chain of scheme transactions (§83).
SDLT payable in respect of scheme transactions
- Means the amount that should have been paid, not the amount that was paid (Tower One, §§103 - 107).
Chargeable consideration for notional transaction
- Means the largest amount (or aggregate amount) (s.75A(5)):
(a) given by or on behalf of any one person by way of consideration for the scheme transactions;
(b) received by or on behalf of V (or a person connected with V) by way of consideration for the scheme transactions
- "Given by way of consideration"
- There is logically a distinction between funds given by way of consideration and given in other ways (e.g. a gift).
- Query whether funds paid as share capital are 'given by way of consideration'.
- It appears to have been assumed, without argument or discussion, that they were in Tower One, albeit the point was irrelevant (§111).
- "Received by or on behalf of V or a person connected with V"
- Aggregate amounts received by both V and persons connected with V (Tower One, §125).
Aggregating consideration means value of the interest in land may be counted twice (or more)
- In Tower One, the aggregation of consideration received by V or a connected person led to the book value of the lease being counted twice.
- First on the consideration for the initial grant of the lease and second on the transfer of the lease up following grant.
- In principle, the same would apply if the parties had used market value rather than book value which would give rise to absurd figures.
- If there is any other scheme transaction (or the scheme transactions qualify for a relief that the notional transaction does not), s.75A can apply.
Exclude consideration for incidental transactions from notional chargeable consideration
- In calculating the chargeable consideration for the notional transaction, ignore consideration for transactions that are "merely incidental to the transfer of the chargeable interest from V to P" (s.75B).
- Potentially incidental transactions (s.75B(3)):
(a) transactions undertaken only for the purpose of constructing a building on the land;
(b) sale or supply of anything other than land;
(c) a loan secured by a mortgage or any other provision of finance to pay for a scheme transaction.
- Not incidental transactions (s.75B(2)):
(a) transactions forming part of the process by which the transfer is effected.
- CoA interpreted this as referring to the step plan followed by T rather than objectively essential steps (Tower One, §119).
(b) transactions upon which the transfer of the chargeable interest is conditional.
- CoA held that this included being conditional as part of a step plan rather than just legal conditionality (Tower One §120).
(c) transactions listed in s.75A(3) (subsale and various transactions relating to leases).
- Potentially incidental transactions:
-
Legislation: FA 2003, ss.75A - 75C;
Cases:
Brindleyplace Holdings Sarl v. HMRC [2024] UKFTT 808 (TC);
Murphy v. HMRC [2024] UKFTT 947 (TC), Judge Frost;
The Tower One St George Wharf Limited v. HMRC [2025] EWCA Civ 1588;
HMRC manuals:
Commentary:
See also:
Acquisition by connected company
- Deemed market value consideration (subject to exceptions)
General rule
- Where the vendor is connected with the purchaser, the chargeable consideration is not less than the market value of the subject-matter of the transaction at the effective date (FA 2003, s.53).
- Note: the vendor need not be a company.
- Rule applies subject to any other provision affording exemption or relief, e.g. group relief (s.53(4)).
Connected persons
- Apply the rules in CTA 2010, s.1122 (FA 2003, s.53(2)).
- In essence:
- A company is connected with another company if they are under the same control/controlled by connected persons.
- A company is connected with an individual if the individual controls the company alone or with connected persons.
- Persons acting together to control a company are connected with each other.
Interaction with other rules re consideration
- Annuity rule in FA 2003, s.52 does not override the connected company market value rule (M&M Builders).
Exception 1: Acquisition as trustee in course of trust management business
- General rule does not apply where the company holds the property as trustee in the course of a trust management business (s.54(2)).
Exception 2: Acquisition as trustee where only connected due to trustee connection rules
- General rule does not apply where company holds the property as trustee and is connected with the vendor only because of the rules relating to trustee connection, e.g. trustee connected with settlor (s.54(3)).
Exception 3: Vendor is company distributing assets
- General rule does not apply where vendor is a company and the transaction is part of a distribution of assets of that company (s.54(4)).
- There must not have ben a relevant claim for group relief relating to the land in the last 3 years.
- Query whether this exception can apply where there is an intra-group transfer of assets at undervalue.
- This point is raised but not determined in Tower One at §30.
Legislation: FA 2003, s.52, s.53, s.54; CTA 2010, s.1122;
Cases:
M&M Builders (Norfolk) Ltd v. HMRC [2021] UKUT 103 (TCC);
The Tower One St George Wharf Limited v. HMRC [2025] EWCA Civ 1588;
HMRC manuals:
Commentary:
See also:
- Notional s.75A transactions and deemed market value rule
Application of the general rule
- If the notional transaction satisfies the terms for s.53 to apply (e.g. acquisition by connected company), the market value rule applies (s.75C(6)).
The distribution exception
- It appears that the distribution exception in s.54 can in principle apply.
- The same query as referred to above arises as to whether a transfer at undervalue is a distribution for these purposes.
- The distribution exception cannot apply where the vendor was not beneficial owner of the asset and, therefore, not able to make a distribution (Tower One, §99).
- On the facts of Tower One, the notional vendor acted as bare trustee and granted a lease. A bare trustee granting a lease is treated as the vendor, but CoA said not treated as beneficially entitled to the interest, hence no distribution.
Legislation: FA 2003, s.75C;
Cases: The Tower One St George Wharf Limited v. HMRC [2025] EWCA Civ 1588;
HMRC manuals:
Commentary:
See also:
Consideration includes shares
- Acquisition by company where consideration includes shares in company connected with vendor (market value rule)
- The same market value consideration rule applies where the purchaser is a company and the consideration includes shares in a company with which the vendor is connected (s.53(1)(b)).
- See above for further details and exceptions.
Legislation: FA 2003, s.53;
Cases:
HMRC manuals:
Commentary:
See also: