'Pony paddocks' are residential for SDLT purposes

In (1) David Hyman and Sally Hyman and (2) Craig Goodfellow and Julie Goodfellow v HMRC [2022] EWCA Civ 185, the Court of Appeal (CoA) found that there is no acreage limit on the land that could be classed as residential property for Stamp Duty Land Tax (SDLT) purposes. 

This case was a joint appeal by the appellants against Upper Tribunal (UT) decisions that determined that land sold with a house was subject to SDLT at residential rates.

The appeal was on the grounds that guidance produced by HMRC at the time legislation was introduced, limited the land that should be viewed as residential property for SDLT purposes. 

If the land consisted entirely of residential property, then SDLT is charged at Residential rates whereas if the relevant land consists of or includes land that is not residential property SDLT is charged non-residential rates.

This would have resulted in the acquisition of dwellings which included significant quantities of land being treated as mixed use and leading to a decreased SDLT liability.

Note that the UT case also featured Messrs Pensfold who were not included in the appeal to the CoA.

Background

Details of the properties in each case were as follows:

• Hyman House and 3.5 acres near St Albans which included:
  • The house and a rectangular cultivated garden and a 'secondary garden' which was agreed as residential property.
  • A dilapidated barn and a meadow which the appellant argued was not residential property.
• Goodfellow; House and 4.5 acres of land in Hampshire which included:
  • Gardens and swimming pool which was agreed as residential property.
  • A garage office, stable yard and paddocks which the appellant argued were not residential property.

The FTT decisions

Hyman; the FTT found that the entire property was residential property as:

• Residential property means a building that is used as a dwelling and land that forms part of the garden or grounds of the dwelling including any buildings on that land.
• 'Grounds' is intended to have a wide meaning and should mean land attached to or surrounding, a house that is occupied and is available for the occupants to use. It would not include land if it was used for a separate (e.g. commercial) purpose.

Goodfellow; the FTT found that the entire property was residential property as:

• The land surrounding the house was essential to its character and to protect the privacy, peace and enjoyment of its country setting.
• The garage, paddock and stable yard were residential property as:
  • The garage office was suitable for domestic use and was wholly residential in character.
  • There were no commercial operations in place in the paddock and stable yard.
  • The paddock and stable yard were necessary for the enjoyment of the equestrian property.

UT decision

The UT dismissed the appeals as:

• While a connection was required between the garden or grounds and the dwelling, there was no definition of what that connection was.
• Land purchased with a property did not need to be required for the reasonable enjoyment of the dwelling in order to be considered residential property for SDLT purposes, dismissing the taxpayers' argument.
• The UT also endorsed the approach taken in HMRC's SDLT manuals.

The CoA decision

The CoA dismissed the appeal:

• The taxpayers contended that there should be a limiting factor that precludes ‘excess’ land, that is land not required for the reasonable enjoyment of the property, from being residential property for SDLT purposes. This was suggested by guidance produced at the time the legislation was enacted.
• The CoA relied on recent Supreme Court decision in R (on the application of O) v Secretary of State for the Home Department [2022] UKSC 3 when deciding that such guidance played a secondary role in the meaning of statutory provisions and could not displace the meaning conveyed by the statute which is clear and unambiguous.
• There was no such ambiguity in the legislation that the guidance was addressing.
• The CoA also pointed out the guidance relied upon related to Stamp Duty, not SDLT.

Useful guides on this topic

SDLT: land attached to property is residential
In (1) David Hyman and Sally Hyman (2) Pensfold (3) Craig Goodfellow and Julie Goodfellow v HMRC [2021] UKUT0068 the Upper Tribunal (UT) considered the definition of residential property and determined that residential rates of Stamp Duty Land Tax (SDLT) should apply to the purchase of three different properties that all included substantial plots of land.

SDLT: Residential property & dwellings
What is residential property for Stamp Duty Land Tax (SDLT)? What tax rate applies? What garden and grounds are subject to higher rates of SDLT?

SDLT: At a glance, Stamp Duty Land Tax, rates & allowances
What is Stamp Duty Land Tax (SDLT)? What are the rates of Stamp Duty Land Tax (SDLT)?

External links

(1) David Hyman and Sally Hyman and (2) Craig Goodfellow and Julie Goodfellow v HMRC [2022] EWCA Civ 185