2nd February 2026 | Caroline Vernon | Residential Property, Stamp Duty Land Tax, Tax Tribunal

A recent, and somewhat unusual, Tax Tribunal case highlights the fact that combining a purchase of non-residential land with a purchase of high-value residential land can still be an effective way to secure the application of the much lower rates of SDLT applicable to “mixed-use” purchases.

In Sehgal v The Commissioners for HM Revenue and Customs [2025], 24 November 2025, the relevant transaction involved the purchase, under one contract and for an unapportioned purchase price of £18.25m, of (i) a high value apartment, (ii) a parking space, (each by way of assignment of existing long leases with over 900 years left to run) and (iii) a separate small basement storage unit (approximately 2m x 4m) on a new 20 year lease, each with its own title. The buyers submitted one Stamp Duty Land Tax (SDLT) return for the combined purchase of the apartment, the parking space, and the storage unit, and applied the residential rates. The SDLT return was later amended by the buyer’s agents to seek a refund of £1,749,250 of SDLT on the basis the much lower “mixed-use” rates of SDLT should have been applied as the transaction had also included the purchase of non-residential property, being the purchase of the storage unit which was non-residential property. The case concerned whether SDLT should be calculated at residential or mixed-use rates. The buyers asserted that the storage unit was not residential property as it could exist independently of the apartment, regardless of who owned it, and because it had uses separate from the apartment. As such, they argued the transaction should be treated as mixed-use for SDLT purposes. Conversely, HMRC contended that the acquisition was a wholly residential, single transaction. Their argument centred on the three parts being encompassed by one transaction, with a single premium, and that there was a clear intention to ‘keep the apartment linked to the storage unit’ for convenience.

The FTT disagreed with HMRC and held that the storage unit did not fall within the Finance Act 2003, s.116(1)(c), an interest in or right over land that subsists for the benefit of a dwelling or its garden/grounds, because it was a legally and functionally separate interest. This was because it had its own title and lease and was not “appurtenant or pertaining” to the apartment, as it could be independently assigned and held by a different apartment owner. As the transaction included non residential property, the non residential/mixed use rates applied to the whole acquisition.

It must be noted that this case is a rather extreme example. The outcome of this case was centred on the separateness of the title and independent functions of the three spaces. A part of a property that is effectively ancillary to the flat will typically be treated as residential. Therefore, the buyers were fortunate that the storage unit was not treated as akin to a garage or outbuilding. Please note that:

  • This was an FTT decision and so does not create any binding precedent.
  • HMRC noted via the Chartered Institute of Taxation, that they “do not agree with the First-tier Tribunal’s decision, and [they] intend to appeal”.
  • This case will of course encourage SDLT ‘scheme promoters’ to push claims for Mixed Use treatment on more and more extreme facts. If they do so, this will no doubt encourage HMRC to push the government to look closely again at changing the SDLT treatment of mixed-use transactions. For example, they may argue for some form of “just and reasonable apportionment” to apply to “mixed use” transactions, applying residential rates to the residential element and non-residential rates to the non-residential elements.

Always obtain specialist tax advice on the treatment of your property purchase to SDLT. 

Related insights