Summary of Tribunal Decision
Factual and Procedural Background
The Appellants purchased a fourth-floor apartment (the "Apartment"), a car parking space and a small basement storage unit (the "Storage Unit") in a building (the "Building") under a single agreement for a single premium of £18,250,000, completed on 4 March 2022. The Apartment and the parking space were acquired by assignment of long leases (each for over 900 years). The Storage Unit was acquired by a separate new 20-year lease granted on the same date. Each lease was registered under a separate Land Registry title number. The Storage Unit lease contained covenants restricting use (to private residential storage ancillary to an apartment in the Building) and contained consent provisions for assignment/underletting limited to owners or tenants of residential apartments in the Building.
The Appellants submitted a single SDLT return on 7 March 2022 treating the transaction as residential and paying SDLT at the residential (higher) rates. Their agents later applied for an amendment, asserting a mixed-use treatment (initially relying on shared amenities but later relying, as an alternative, on the nature of the Storage Unit lease) and sought a refund of £1,749,250. The Respondents issued a closure notice on 21 July 2023 upholding liability at residential rates and refusing the refund. The Appellants appealed and, after a stay pending determination of another case, proceeded on amended grounds focusing on the Storage Unit lease. The hearing was by remote video on Microsoft Teams; the Tribunal had substantial documentary bundles and a brief witness statement from one of the Appellants (accepted but not relied on for primary facts). The Tribunal issued reasons and allowed the appeal.
Legal Issues Presented
- Whether the Tribunal had jurisdiction to consider the Appellants' amended grounds of appeal (procedural/jurisdiction point arising from the scope of the closure notice and the SDLT return).
- Whether the acquisitions of the Apartment and the Storage Unit constituted separate land transactions or a single transaction; if a single transaction, whether the Storage Unit lease was an "interest or right appurtenant or pertaining to" the Apartment lease (the "separate transaction / appurtenant or pertaining" issue).
- Whether the Storage Unit constitutes "residential property" for SDLT purposes, specifically whether the Storage Unit lease is "an interest in or right over land that subsists for the benefit of" a building used or suitable for use as a dwelling under FA 2003, s 116(1)(c) (the "residential property" issue).
Arguments of the Parties
Appellants' Arguments
- The acquisitions of the Apartment and the Storage Unit were separate land transactions because they are separate legal interests in separate pieces of land, capable of separate ownership and transfer.
- The Storage Unit lease has an independent legal existence (separate title, separate lease, different term) and therefore cannot be appurtenant to the Apartment lease in the same way an easement can be appurtenant to a dominant tenement.
- The Storage Unit lease does not "subsist for the benefit" of the Apartment under FA 2003, s 116(1)(c): it benefits the holder of the Storage Unit lease (an identified legal estate), can be assigned or sold independently (subject to limited consents), and may benefit different apartments or no apartment at all over time.
- Land Registration provisions (LRA 2002, ss 12(3) and 59(1)) indicate that an interest that subsists for the benefit of a registered leasehold estate would be registered in relation to that estate; the Storage Unit lease has its own register entry and is not shown as subsisting for the benefit of the Apartment.
- If separate but linked transactions exist, FA 2003, s 108(2) permits a purchaser to notify linked transactions on a single return, so the Appellants' original return did not preclude their position on linked transactions.
Respondents' Arguments
- Jurisdiction: The Respondents submitted the Tribunal lacked jurisdiction to consider the Appellants' amended case on linked/separate transactions because the SDLT return had self-assessed as a single transaction and the Respondents' enquiry and closure notice were limited in scope to the amendment actually made (change to mixed-use classification). They contended that advancing the linked-transactions position amounted to effectively raising a new issue outside the closure notice and enquiry scope.
- Substantive (separate transaction / appurtenant): The Respondents argued the facts pointed to a single overarching transaction (same contract, same completion date, single premium). They submitted a land transaction can encompass multiple chargeable interests and that the Storage Unit was acquired with and for the benefit of the Apartment (or at least the overall package) and should be disregarded as an appurtenant/pertaining interest for purposes of s 55, leaving only the dwelling to be taxed at residential rates.
- Substantive (residential property): The Respondents argued the Storage Unit lease subsisted for the benefit of the Apartment (or of a dwelling within the Building) because of its restrictions on assignment/underletting and on use, and because it was contained in the same building and provided an ancillary residential benefit. They also urged a purposive approach to statutory interpretation and asked the Tribunal to have regard to later legislative wording (Sch 4ZA, para 18) when construing s 116(1)(c).
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Case A: Gilchrist v HMRC [2014] UKUT 169 (TCC) |
Statement that the Tribunal is not strictly bound by previous First-tier decisions but should follow them under judicial comity unless convinced they are wrong. |
The Tribunal treated earlier FTT decisions as persuasive authority and applied the principle of comity when considering prior approaches to "main subject-matter" and "appurtenant or pertaining". |
| Case B: Sexton v HMRC [2023] UKFTT 73 (TC) |
Consideration of when an easement is an "interest or right appurtenant or pertaining" and application of s 116(1)(c) to an easement that subsists for the benefit of a flat. |
The Tribunal relied on Sexton as an example where an easement (right to use communal garden) was appurtenant and also fell within s 116(1)(c); it used Sexton as a comparator but distinguished the present facts because the Storage Unit lease had an independent existence. |
| Case C: Espalier Ventures Property Ltd v HMRC [2023] UKFTT 725 (TC) |
Treatment of physically detached ancillary structures (garages) and communal garden rights; discussion of main subject-matter and easements appurtenant. |
The Tribunal noted Espalier accepted garages as part of main subject-matter and found communal garden rights appurtenant; the current Tribunal compared these findings and distinguished on the basis that the Storage Unit lease is a separate legal estate. |
| Case D: Bonsu v HMRC [2024] UKFTT 159 (TC) |
Held that the main subject-matter was the leasehold apartment and that an easement was appurtenant; also was the case behind which the present appeal was stayed. |
The Tribunal followed Bonsu's approach to main subject-matter and appurtenant easements in part, but distinguished the Storage Unit lease from the easements at issue in Bonsu. |
| Case E: Regency Villas Title Ltd v Diamond Resorts (Europe) Ltd [2018] UKSC 57 |
Supreme Court discussion of the nature of easements, including that a right that accommodates a dominant tenement is appurtenant and connected with normal enjoyment of that tenement. |
Used as authority for deriving the land-law meaning of "appurtenant" and for assessing whether an interest is annexed to or inseparable from a dominant tenement. |
| Case F: HMRC v Tower MCashback LLP [2011] UKSC 19 |
Principles on the scope of appeals from closure notices and the matters defined by conclusions in closure notices. |
The Tribunal considered Tower MCashback when addressing the Respondents' jurisdictional challenge and concluded that the scope of appeal is defined by closure notice conclusions, not solely by the reasoning set out therein. |
| Case G: Fidex Ltd v HMRC [2016] EWCA Civ 385 |
Summarised principles: scope and subject matter of appeal defined by closure notice conclusions; closure notice read in context; HMRC may advance new arguments to support closure notice conclusions. |
The Tribunal applied the principles from Fidex to reject the Respondents' submission that the amended grounds were outside the Tribunal's jurisdiction and to permit the Appellants' challenges to the closure notice conclusion. |
| Case H: Shinelock Ltd v HMRC [2023] UKUT 107 (TCC) |
Consideration of procedural fairness and limits on permits to raise new arguments (avoidance of ambush, parties' right to know the case). |
The Tribunal addressed fairness and case management concerns in light of Shinelock and concluded there was no ambush; the Respondents had sufficient notice and time to consider the arguments. |
| Case I: Mudan v HMRC [2025] EWCA Civ 799 |
Discussion of purposive statutory interpretation, and that definitions (e.g., "residential property") may be broad and relate to land use. |
The Tribunal cited Mudan for general guidance on statutory interpretation but distinguished its context and declined to apply the broader land-use remarks to the present s 116(1)(c) analysis. |
| Case J: R(O) v Secretary of State for the Home Department [2022] UKSC 3 |
Guidance on statutory interpretation emphasising context, purpose and objective parliamentary intention. |
The Tribunal used the principles from R(O) when construing FA 2003 provisions, emphasising context and statutory language as the primary source of meaning. |
| Case K: Bailey v Stephens (1862) 12 CB(NS) 91 |
Historical authority cited in Regency Villas about the connection required between an easement and the dominant tenement. |
Referenced via Regency Villas to support the land-law understanding of what it means for a right to benefit a tenement. |
| Case L: Kozlowski v HMRC [2023] UKFTT 711 (TC) |
Observation that s 116(1)(c) is apt to cover rights exercisable over someone else's land rather than rights in the subject property itself. |
The Tribunal relied on Kozlowski as supporting the proposition that s 116(1)(c) is generally concerned with rights over other land (e.g., easements), not separate leasehold estates in the subject property itself. |
| Case M: Landmaster Investment Ltd v HMRC [2023] UKFTT |
Consideration and rejection of argument that "relevant land" should be the entire building such that communal/non-dwelling parts would prevent classification as entirely residential. |
The Tribunal noted Landmaster but found it did not assist the Respondents' case on the specific facts before it. |
| Case N: The How Development 1 Ltd v HMRC [2021] UKFTT 248 (TC) (and UT appeal [2023] UKUT 84) |
Discussion of land that is physically detached but considered to subsist for the benefit of a house (applied to s 116(1)(b) in that case). |
The Tribunal found The How factually different and not persuasive on s 116(1)(c) in the present case. |
| Case O: Royal College of Nursing v Department of Health and Social Security [1981] AC 800 |
Quoted in relation to the "updating construction" principle — when courts may treat an enactment as always speaking to accommodate new facts. |
The Tribunal considered but rejected the application of an updating construction to import later wording from Sch 4ZA into s 116(1)(c) in the present factual context. |
Court's Reasoning and Analysis
The Tribunal set out a structured analysis addressing (a) jurisdiction, (b) whether the transactions were separate or a single transaction and whether the Storage Unit lease was appurtenant or pertaining, and (c) whether the Storage Unit is "residential property" under FA 2003, s 116(1)(c).
Jurisdiction
The Respondents argued the Tribunal lacked jurisdiction because the Appellants' amended grounds relied on linked/separate transactions that were not reflected in the SDLT return and were outside the closure notice enquiry scope. The Tribunal applied the principles from Tower MCashback, Fidex and Shinelock and concluded that the scope of appeal is defined by the conclusions stated in the closure notice (not by HMRC's reasoning). The closure notice's conclusion was that the residential rates applied. The Appellants' arguments concerning the Storage Unit lease had been raised in the statutory review period and in earlier correspondence; accordingly, there was no unfair ambush and the Tribunal had jurisdiction to consider the amended grounds.
Separate transaction / Appurtenant or Pertaining
The Tribunal considered whether the Apartment and the Storage Unit were separate land transactions or whether they constituted a single transaction in which the Storage Unit lease was an "interest or right appurtenant or pertaining" to the Apartment lease (per FA 2003, s 43(6)). The Tribunal:
- Found that the fact of a single contract and a single premium is not determinative; separate legal interests with separate land parcels and separate Land Registry titles can nonetheless be separate transactions, and Parliament has separate linked-transactions provisions for such situations (FA 2003, s 108).
- Concluded on balance that the Apartment and the Storage Unit acquisitions were separate land transactions, because each is a separate legal interest in separate land that could be owned or transferred independently.
- Noted in the alternative (in case the finding on separation were wrong) that even if treated as a single transaction, the Storage Unit lease was not an "interest or right appurtenant or pertaining" to the Apartment lease: the Storage Unit lease was a distinct lease, granted separately, capable of independent assignment/underletting (subject to consent restrictions), and did not have the inseparable character of an easement appurtenant to a dominant tenement as explained in Regency Villas and in prior Tribunal decisions (Sexton, Bonsu, Espalier).
- Explained that "appurtenant" was to be understood by reference to land-law meaning (as applied to easements) and that a leasehold estate is different from an easement; because the Storage Unit lease had an independent legal existence, it was not appurtenant in the same sense as the easements in the comparator cases.
- Considered "pertaining" and applied ejusdem generis to construe it as similar in character to "appurtenant"; found the Storage Unit lease did not "belong to" the Apartment lease as a part, appendage or accessory and therefore did not "pertain" to it.
Residential property (FA 2003, s 116(1)(c))
The Tribunal considered whether the Storage Unit lease qualified as "an interest in or right over land that subsists for the benefit of" a building used or suitable for use as a dwelling. Key points from the Tribunal's analysis:
- Distinguished the present facts from cases (Sexton, Bonsu) where the right at issue was an easement created by the lease and having no independent existence; here the Storage Unit lease was independent, had its own title and distinct term.
- Emphasised that s 116(1)(c) requires the relevant interest or right to subsist for the benefit of the building (i.e., the dwelling), not merely to provide some ancillary convenience to an owner. The Storage Unit lease benefits the holder of that lease (the leasehold estate), not the Apartment in rem. The lease could be sold or assigned to others and could, at times, benefit no apartment at all; this was inconsistent with the statutory concept of subsisting for the benefit of a particular dwelling.
- Relied on Land Registration provisions (LRA 2002, ss 12(3) and 59(1)) to support a land-law meaning of "subsisting for the benefit" and noted the Storage Unit lease was registered separately, consistent with it not subsisting for the benefit of the Apartment lease as such.
- Rejected the Respondents' submission that later-enacted Sch 4ZA para 18 (2016) should be read back into s 116(1)(c) by an "updating construction" to import the different wording ("land that subsists … for the benefit of a dwelling")—the Tribunal found that principle inapplicable here and that s 116(1)(c) should be interpreted as enacted.
- Considered an alternative formulation that the Storage Unit could subsist for the benefit of "a building within paragraph (a)" as the Building as a whole, but rejected applying s 116(1)(c) to the Storage Unit as part of the Building itself (following Kozlowski) and rejected an interpretation that would allow the identity of the benefited dwelling to vary over time (or to be none at certain times).
- Concluded that the Storage Unit lease is not "an interest in or right over land that subsists for the benefit" of the Apartment (or of a particular dwelling) and therefore does not fall within FA 2003, s 116(1)(c).
Consequence of the two strands of analysis
The Tribunal observed that even if it had been wrong to treat the transactions as separate, its alternative conclusion (that the Storage Unit lease was not appurtenant or pertaining to the Apartment lease) meant that, on either analysis, the Storage Unit is not residential property under s 116(1)(c). Because one of the linked or combined pieces of "relevant land" is non-residential (the Storage Unit), the appropriate SDLT table is the non-residential table (Table B), not the residential Table A.
Holding and Implications
APPEAL ALLOWED
Holding: The Tribunal allowed the Appellants' appeal. It found (i) that it had jurisdiction to consider the amended grounds; (ii) that the Apartment and Storage Unit acquisitions were separate land transactions (with an alternative finding that, even if a single transaction, the Storage Unit lease was not an "interest or right appurtenant or pertaining" to the Apartment lease); and (iii) that the Storage Unit lease is not "an interest in or right over land that subsists for the benefit" of a dwelling under FA 2003, s 116(1)(c). For these reasons the Storage Unit is not residential property and the non-residential SDLT rates apply (Table B).
Implications: The direct effect is that the SDLT treatment adopted by the Respondents (residential, Table A) was incorrect on the Tribunal's findings and the transaction should be taxed using the non-residential table (Table B), reversing the closure notice conclusion. The Tribunal emphasised that its decision turned on the particular factual and legal characteristics of the Storage Unit lease and the statutory language; it did not purport to establish a novel broad principle beyond the facts considered. The decision does not purport to create binding precedent beyond the usual persuasive effect of Tribunal reasoning. The decision notes the conventional right of the Respondents to apply for permission to appeal.
Administrative Details
Hearing conducted by remote video; documentary bundles and authorities considered; brief witness statement accepted but not necessary for findings; decision issued with reasons and statement of parties' right to apply for permission to appeal.
This summary is based exclusively on the content of the provided Tribunal opinion and has been fully anonymised in accordance with the instructions given.