In The How Development 1 Ltd v The Commissioners for HMRC [2023] UKUT 84, the Upper Tribunal reviewed arguments as to whether an inhospitable woodland was residential grounds for Stamp Duty Land Tax (SDLT) purposes: based on recent rulings of the Court of Appeal and Upper Tribunal. It decided that it was.

  • The How, was purchased in March 2018 for £2.8 million for redevelopment. It comprises approximately 15.5 acres of land, which includes:
    • The main house, a lodge, outbuildings and areas previously used as market gardens and orchards,
    • Gardens, grounds and woodland (extending to approximately two acres).
  • The original Stamp Duty Land Tax (SDLT) return for the purchase by How was completed on the basis that the property was Residential property.
  • SDLT of £334k was paid. Following advice, an amended SDLT return was submitted advising that the property had been misclassified, as the woodland to the south of the property rendered the transaction subject to tax at Lower non-residential rates. A £204k refund was claimed.
  • HMRC denied the refund.

On Appeal to the First Tier Tribunal confirmed HMRC's view that the whole property was residential, there being no evidence of any contemporary commercial use of the land or woodland.

The taxpayer appealed the decision to the Upper Tribunal (UT).

Its main argument in the appeal was that as the land was inaccessible from the main house and also so steep that, it would never be habitable for residential planning, and as such it could not comprise as grounds for the dwelling. Consequently, by default, it must be non-residential.

In reviewing the Court of Appeal 'pony paddock' case of (1) David Hyman and Sally Hyman and (2) Craig Goodfellow and Julie Goodfellow v HMRC [2022] EWCA Civ 185, the UT noted the multi-factorial evaluation in Hyman 'was inevitably impressionistic in nature and was not an exact science'.

Embracing that approach, and weighing up all material factors, it found that the FTT had made some error of law in their decision: they had placed reliance on the fact that the original return had been submitted on the basis that the whole estate was residential, that should not have been a factor. Further, they had not fully assessed the oral evidence of a witness.

The UT considered its options as to whether referring the decision back to the FTT would be an acceptable course of action in terms of potential costs and delay. It did not and it re-made the decision taking the following factors in particular into account, all of which were taken into account by the FTT:

  • There was no evidence of the use or exploitation of the woodland for commercial purposes. Nor was there any evidence of the use or exploitation of the woodland for any purpose other than that of woodland.
  • The woodland provided privacy and security to The How by virtue of its location as a hillside barrier between The How and the River Ouse.
  • The woodland fell within the legal title of the property.
  • The position and layout of the land and outbuildings was such that the woodland was not inordinately distant from the house and its size and location increased the privacy and security of The How from the south.
  • The woodland was densely populated and relatively inaccessible

The appeal was dismissed

Useful guides on this topic

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)?

SDLT: Residential Property Higher Rates
What Stamp Duty Land Tax (SDLT) rate applies for the purchase of a second home? What is the SDLT higher rate? Are there any reliefs from the SDLT higher rate?

Closure notices
When does HMRC issue a Closure Notice? Can a taxpayer demand one? Are there appeal rights?

Statutory Review (by HMRC)
What is a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review? 

How to appeal an HMRC decision
Disagree with a HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

SDLT on residential property despite woodland and 15 acres
In The How Development 1 Ltd v HMRC [2021] TC8194, the First Tier Tribunal (FTT) determined that the purchase of a substantial property and grounds consisted entirely of residential property and was subject to higher residential rates of Stamp Duty Land Tax (SDLT).

External links

The How Development Ltd v The Commissioners for HMRC [2023] UKUT 00084 SDLT


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