Brzezicki v HMRC : SDLT Carrier Stream in Commercial vs Residential

The First-tier Tribunal (FTT) decided on Brzezicki v HMRC, finding that the property purchased by Mr Brzezicki (the “Appellant”) comprised both residential and non-residential land, thereby attracting the comparatively lower SDLT rates applicable to mixed-use property under Table B of section 55 Finance Act 2003 (the “Act”). 

On 3 July 2020, the Appellant purchased a 6-acre property comprising a dwelling with gardens and a two-acre island separated by a carrier stream. The stream, which connects to the River Meon at both ends, contained features designed for wild brown trout breeding: a waterfall, gravel beds, ranunculi plantations, and a deeper section. The island was accessible by two footbridges requiring repair and contained a rundown fisherman's cabin. The plan attached to the transfer document indicated fishing rights to the midpoint of the River Meon. The Appellant initially filed his SDLT return claiming the property was wholly residential, then amended it to claim mixed use. After the amendment, HMRC opened an enquiry and subsequently concluded that the property was wholly residential. Disagreeing with this outcome, the Appellant took the matter to the FTT. 

The FTT was required to determine whether the acquired property fell solely within the definition of ‘residential property’ under Section 116(1) of the Act, thereby attracting the residential SDLT rates, or whether it constituted mixed-use property, which would attract the comparatively lower non-residential SDLT rates 

FTT allowed the appeal, finding the property comprised both residential and non-residential land. The FTT applied the multifactorial test for determining whether land forms part of the garden or grounds of a building under section 116(1)(b).  

Although the Tribunal Judge and the Tribunal Member reached differing conclusions, the prevailing decision, issued by the Tribunal Judge, held that land must be contiguous with a dwelling to form part of its garden or grounds, meaning directly connected without interruption. As the carrier stream created a physical separation, the island could not be considered contiguous with the dwelling. The carrier stream functioned as a piece of plant specifically designed for breeding wild brown trout, with its sluice, waterfall, shallow breeding ground, ranunculi plantations and grille system all serving this commercial purpose.  

Moreover, the FTT held that commercial activity need not be ongoing at completion for land to be classified as non-residential. The fishing rights attached to the island naturally supported a wild brown trout fishing enterprise rather than serving merely as leisure amenities for the dwelling. Applying Section 116(1), the FTT concluded that the island did not form part of the dwelling’s garden or grounds and therefore allowed the appeal. 

Read the full decision of Brzezicki v HMRC [2024] UKFTT 845 (TC) here.