You’re Grounded!: Grounds & Residential Property for SDLT

Stamp Duty Land Tax (SDLT) is charged to the buyer on the acquisition of land in England and Northern Ireland. With the rates for SDLT typically being greater for residential land, there is an incentive for property to be deemed non-residential for tax purposes.

In the case of Hyman, Pensfold, & Goodfellow v HMRC [2021], the Upper Tribunal upheld the rulings of the First-Tier Tribunal and found that land bought together with a house formed part of the garden and grounds. Therefore, the residential rates of SDLT applied on the full purchase price with no reductions given for the fact that the houses were acquired with a substantial amount of land.

Background

The Upper Tribunal considered three cases all with similar background facts. Each case concerned the purchase of a house together with a large area of land, with further details provided below:

1.Hymans

The property purchased comprised a house and 3.5 acres of land. On the land stood a cultivated garden, a large barn in a bad state of repair, a second garden, a bridleway, and a meadow. The Hymans argued  that the barn, meadow, and bridleway were not part of the garden or grounds of the house and as such should be charged to SDLT at the non-residential rates.

2.Pensfold

The property comprised a farmhouse and 27 acres of land.

3.Goodfellows

The property comprised a house and 4.5 acres of land. On the land were gardens, a swimming pool, a garage, a stable yard, and paddocks. It was argued that a room above the garage had been used by the vendor as an office and was not residential for SDLT purposes, along with the stable yard and the paddocks.

The Case

In determining the rate of SDLT applicable, the relevant legislation defines “residential property” as:

1. a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use; AND
2. land that is or forms the garden or grounds of a building

The issue in each case was whether all the land sold together with the house “was or formed part of the garden and grounds of the house”.

It was agreed that each of the houses purchased were “buildings suitable for use as a dwelling” within point 1. above. The question was the extent to which the land acquired along with each  property made up the garden or grounds of that building.

The taxpayers contended that land can only be part of the garden or grounds of the house if the land is needed for “the reasonable enjoyment of the house, having regard to the size and nature of the house”. If this interpretation was accepted, then the taxpayers may be entitled to a reduced SDLT liability due to the excess land being taxed at the non-residential rates.

HMRC disagreed, noting that “garden” and “grounds” were to be taken in their ordinary meaning and that the SDLT legislation provided no further requirement for the “reasonable enjoyment of the land”.

The Decision

The Upper Tribunal agreed with HMRC and held that there is no requirement that the land in question must be needed for the reasonable enjoyment of the dwelling in order for it to be deemed residential land; the garden and grounds merely need to be connected with the dwelling acquired. It was found that nothing in the wording of the legislation imposes, or even hints at, a requirement that land can only be garden or grounds if the land is needed for the reasonable enjoyment of the dwelling.

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