FTT Confirms Residential SDLT Rates for Leasehold with Garden Easement

The First-tier Tribunal’s (FTT) decision in Bonsu & Anor v Revenue and Customs [2024] UKFTT 158 (TC) clarifies that communal garden rights acquired as part of a residential leasehold interest constitutes right pertaining to the main residential interest itself, rather than separate chargeable interests. The FTT confirmed that such integrated residential property acquisitions remain subject to residential Stamp Duty Land Tax (SDLT) rates.

The appellants purchased a leasehold interest in a property which granted various communal rights, including an easement over garden areas, accessible only to the apartment owners, within the development. Initially, the appellants paid SDLT based on higher residential property rates (as applicable to additional dwellings). Subsequently, they sought a refund, arguing that the communal garden rights constituted non-residential property requiring mixed-use SDLT treatment. HMRC rejected this claim, leading to the present appeal.   

The primary issue before the FTT was whether the acquisition should be classified as mixed-use property, subject to the non-residential SDLT rates, or as purely residential property, subject to the residential SDLT rates. Specifically, the FTT was required to determine whether the garden easement constituted a separate "main subject matter" under Section 43(6) of the Finance Act 2003 (the “Act”), whether multiple linked transactions existed, and how the communal garden rights should be characterised.

The FTT dismissed the appeal in its entirety, upholding HMRC's position that the transaction remained subject to residential SDLT rates with no refund due.

In reaching that conclusion, FTT reasoned that the leasehold interest in the apartment was the sole main subject matter of the transaction, with the garden easement properly characterised as “appurtenant or pertaining to” that interest rather than constituting separate chargeable consideration. It was found that Section 43(6) of the Act envisages a singular main subject matter, evidenced by the statutory language using "the chargeable interest" and "it" in singular terms. Furthermore, FTT rejected arguments for multiple linked transactions, finding only one contract for the lease transfer existed, the easement had no independent existence outside the lease, was granted within the lease documentation as part of a package of rights and was paid for through service charges rather than separate consideration. Even if considered independently, it was held that the easement constituted residential property under Section 116(1)(c) of the act as a right subsisting for the benefit of a residential dwelling.

The judgment confirms that commercial elements within residential developments do not automatically create mixed-use classification while providing clear guidance on the boundaries of the main subject matter test.

Read the full decision of Bonsu & Anor v Revenue and Customs [2024] UKFTT 158 (TC) here.