Anti-avoidance provision applied to mixed use relief claim

The taxpayer bought two large adjoining properties from the same vendor.

One of the houses had been used as an artist’s studio and the taxpayer’s solicitor advised him that if the property were in commercial use at the time of completion he would be able to claim mixed used relief. So the taxpayer arranged for a photography business to take a nine-month commercial lease to enable him to claim mixed use relief - relying on HMRC’s Stamp Duty Land Tax Manual at SDLTM365 which at the time stated: ‘SDLT is assessed on the basis of use at the time of the purchase so if there is a genuine arm’s length commercial tenancy that should be mixed use rather than residential.’

HMRC refused relief. It said the property was residential and although it was not in use as a dwelling at...