In Raj Sehgal Varsha Sehgal v HMRC [2025] UKFTT 01439 (TC), the First-tier Tribunal (in a decision released in December 2025) ruled that the purchase by the Sehgals (the “Purchasers”) on 4 March 2022 of an apartment, a car parking space, and a storage unit for a single price of £18.25 million was a mixed-use acquisition for Stamp Duty Land Tax (SDLT) purposes. Although the apartment and car space were acquired by assignment of an existing long lease and the storage unit by the grant of a new lease, the transactions were linked. As the property to which these linked transactions (taken together) related was not wholly residential, SDLT was chargeable at the lower mixed-use (non-residential) rates. The Sehgals had originally paid SDLT at the higher residential rates but, following the Tribunal’s decision, were entitled to a refund of £1,749,250, representing the difference between the residential and mixed-use SDLT liabilities.

The Tribunal’s decision

In reaching its decision, the Tribunal recognised the relatively small value clearly attaching to the storage unit (which is on the second floor of the building and measured less than two metres wide and less than four metres deep and could only be used for private residential storage ancillary to an apartment). However, the Tribunal emphasised that the legislation is clear that the residential rates apply only if the relevant land consists entirely of residential property and that the word “entirely” is not ambiguous.

It followed, in the view of the Tribunal, that if even a very small proportion of the land being acquired is non-residential and is not appurtenant to the residential lease, then the (lower) non-residential rates apply. The Purchasers did not argue that the acquisition of the car parking space affected their SDLT liability.

The Tribunal noted that the lease of the storage unit could be assigned to the owner of any apartment at the premises and was not required to be assigned or disposed of with the assignment of the lease of any apartment and so was not tied exclusively to the apartment acquired by the Purchasers (the “Apartment”). As a matter of land law, the lease of the storage unit subsisted independently of the leasehold interest in the Apartment. This was, as the Tribunal noted, in contrast (for example) to a property interest taking the form of an easement consisting of a right granted within a lease having no existence independent of the lease. Considered on its own, therefore, the lease of the storage unit had no more connection to the Apartment than to any other apartment at the premises. It followed, therefore, that the lease of that unit could not, as HMRC had argued, be said to be a right “appurtenant or pertaining to” the Apartment (or any other apartment) such that it might be treated, for the purposes of the SDLT legislation, as part of any dwelling.

The Tribunal considered HMRC’s further argument to the effect that, as the restrictions in the lease of the storage unit on assignment (and indeed, in the same way, on underletting) meant that it could only benefit an apartment in the block at 20 Grosvenor Square (the “Block”), the storage unit should be treated (tracking other relevant legislation) as an interest in or right over land subsisting for the benefit of the Apartment, and therefore as residential property. However, the Tribunal considered this approach put too much of a strain on the statutory language in point. For HMRC’s argument to have traction, it was necessary for the storage unit to benefit a particular identified apartment, not one of a class of dwellings where the identity of the benefited dwelling may change from time to time. Further, given that (as indicated above) it was open to the Purchasers to sell the Apartment and move out of the Block without also, at the same time, disposing of the storage unit (they might need further time to decide how best to dispose of the unit), it would be possible for the storage unit not to benefit any apartment in the Block. The Tribunal could not, therefore, accept this further argument as formulated by HMRC.

Interestingly, the Tribunal noted that this further argument, not having appeared in HMRC’s skeleton argument, had not been well developed by HMRC. Given the high amount of SDLT involved and the residential nature of the Block coupled with the broader connection of the storage unit to the Block, it would not be surprising if HMRC were to seek to appeal the decision of the Tribunal. If so, HMRC could be expected to develop this further argument more fully and comprehensively.

The Purchasers did initially also argue that their rights under the Apartment lease to use the shared amenities and communal areas in the Block also made their Apartment mixed-use but they did not pursue this at the Hearing.

Whilst holding that the acquisition of the leases of the Apartment and storage unit were separate land transactions, the Tribunal held it made no difference if they were a single transaction.

Takeaways from the decision

What is clear from the analysis and decision of the Tribunal is:

  • the centrality of land law principles to the application of SDLT legislation;
  • the effect of including even a very small amount of non-residential property with residential property in a single land transaction or linked transactions: so long as even a very small part of the property included in the transaction or linked transactions is genuinely and indisputably non-residential, the acquisition of the subject matter of those transactions should be subject to the non-residential rates (as mixed residential/non-residential property), regardless of the motive for the inclusion of the non-residential part and regardless of its value; and
  • as a matter of compliance, given that, under the SDLT legislation, a single land transaction return may be submitted in respect of linked transactions entered into on the same day as if they were all a single notifiable land transaction, it is correct for any single land transaction return submitted in respect of such linked transactions to state that the deemed or notional single notifiable land transaction representing or constituted by those linked transactions is not itself linked to any other land transaction (so that the correct answer in the return to the question asking whether the land transaction referred to in it is linked to any other is “No”).

Subject to any appeal by HMRC, there may be other cases too where, as in this case, purchasers of what may be “mixed” dwellings have paid SDLT at the higher residential rates and so may consider whether they should be entitled to a refund.

If you have questions or concerns about the issues raised by this case, please contact Michael Fluss.