Orsman v HMRC – Consideration for SDLT

The case of Orsman v HM Revenue and Customs (TC01921) highlights that care should be taken when attributing sale proceeds between land and ‘chattels’ such as fixtures and fittings.
In this case the taxpayer sold a property for £258,000 of which £8,000 was attributed to chattels and was not therefore included in the sale price for SDLT purposes.
The sale agreement contained a list of fixtures and fittings to which the £8,000 consideration related and this included (amongst other items) fitted units in the garage.
For SDLT purposes the value of fixtures and fittings that are ‘part of the land’ should be included in the sale proceeds for SDLT.
The rate of SDLT is 1% where the sale proceeds are between £125,000 and £250,000, rising to 3% where the proceeds are in excess of £250,000 but less than £500,000.
Therefore if some of the proceeds attributed to chattels were in fact attributable to the land then the rate of SDLT would increase from 1% to 3%.
In determining whether a chattel is part of the land the following two tests should be considered:
1. the degree of annexation of an item to the land (ie is furniture fixed to the wall, what damage would be caused by removing the item?)
2. what is the purpose of the annexation (for example, was the item put in place in order to better enjoy the land or the item?)
In this case the tribunal found that the fitted garage units were provided in order to increase enjoyment of the garage by creating a work space.  Thus the value of the units (agreed to be £800) should have been included in the sale proceeds for SDLT purposes.