SDLTM04010 | Scope: How much is chargeable: fixtures and fittings

Fixtures and fittings/chattels

By virtue of FA03/SCH4/PARA4 a just and reasonable apportionment is required where a price is paid partly for a land transaction and partly for a non-land transaction such as the purchase of chattels. For an item to be regarded as a fixture or part of the land and therefore chargeable to SDLT, as opposed to a chattel which is not chargeable, it must be attached to the property.

The issue will then turn on the degree and purpose of the attachment, with emphasis being placed in many cases on purpose.

In the majority of cases consideration for the transaction will be correctly attributed to the land transaction, with no apportionment for chattels being appropriate. However, where a purchaser agrees to buy a property for a price that includes an amount properly attributed to chattels, that amount will not be subject to SDLT, as long as the purchaser can provide contemporaneous evidence from the conveyancing process that the attribution is genuine and arises from a separate negotiation for those chattels, for example by being expressly identified and priced in the sale contract. Simply showing that there were some chattels in the property when it was sold would not be considered sufficient evidence.

It does not matter that the parties to a transaction may agree a particular apportionment which is then documented in the contract. The apportionment will not be correct unless it was arrived at on a just and reasonable basis. HMRC’s view is that the valuation of any chattels should represent the open market value (including depreciation) at the effective date of the transaction (EDT), bearing in mind the age, quality and condition of each item. Where an item is regarded as a chattel, HMRC would generally expect the open market value for some of these items to be substantially lower than their acquisition cost.

The apportionment of the purchase price may well be one aspect on which an enquiry may be opened. Similarly, HMRC may enquire into cases where a deduction has been made for chattels to confirm that those items properly fall within the definition of chattels.

If challenging a value through an enquiry, HMRC should involve the Valuation Office Agency (VOA), and obtain an itemised schedule of chattels, their condition and their open market value (including depreciation) at the time of the EDT.

HMRC is unable to provide a comprehensive list of items that are accepted as chattels. This is because each case must be considered on its own merits and because this is an area of the law that continues to evolve.

The following items are, however, confirmed as being assets that will normally be regarded as chattels (i.e. tangible, moveable assets)

• carpets (fitted or otherwise)

• curtains and blinds

• free standing furniture

• kitchen white goods (unless fully integrated)

• electric and gas fires (provided that they can be removed by disconnection from the power supply without causing damage to the property)

• light shades.

On the other hand, the following items will not normally be regarded as chattels

• fitted kitchen units, cupboards and sinks

• agas and wall mounted ovens

• fitted bathroom sanitary ware

• central heating systems

• intruder alarm systems.

Externally, any plants, shrubs or trees growing in the soil (including faster growing trees such as Christmas trees) constitute part of the land, while the normal annual crops of an arable farm, felled timber and plants or trees growing in pots do not. Those which are part of the land are not to be regarded as chattels.

The above guidance is written primarily in the context of sales of residential property.

HMRC will generally apply the same principles when considering the purchase of industrial or commercial property in which the sale may also involve the acquisition of plant, machinery or equipment.

Tenant’s fixtures

The question of whether plant or machinery is a fixture or a chattel is determined in the same way as for any other asset.

In particular, tenant’s fixtures in England and Northern Ireland are fixtures and therefore part of the land, notwithstanding that a tenant may have a right to sever them.

While each case depends on its own facts it is unlikely that plant or machinery that can be relatively easily severed from the property to which it is fixed, for example by the simple expedient of removing some bolts securing it to the floor or walls, will be a fixture.

Alternatively heavy plant or machinery that is integral to a building, or plant or machinery whose removal would damage the building or land, is likely to be a fixture.

It follows therefore that escalators and elevators, boilers, furnaces, walk-in refrigerators and restaurant cooking stations are likely to be fixtures.

The tenant's right of severance is also a chargeable interest within the meaning of FA03/S48(1).