Field was residential, although it's hard to tell why

In James George Gibson v HMRC [2023] TC8869, a claim that a property was in mixed-use when acquired and so attracted the non-residential rate of Stamp Duty Land Tax (SDLT) was unsuccessful on appeal. The evidence was indecisive: it was the kind of decision that could go either way.

Mr Gibson purchased a property and paid Stamp Duty Land Tax (SDLT) on the basis that the property transaction was 'mixed-use' and the total amount of tax due was calculated at £69,500. 

• The Property comprised two Land Registry titles. The first comprised of (1) a six-bedroom house, (2) a double garage with, an ‘office/studio’ above it, accessed by an external staircase; (3) a two-bedroom self-contained barn with two bathrooms, open plan living, dining and kitchen area and a mezzanine level, (4) an outbuilding containing two stables and a tack room with an internal floor area of 93m² which could be moved on ‘skids’; and (5) a ‘market garden’(all collectively in 0.5 acres).
• The second title was a 2-acre field/paddock.
• No claim for Multiple Dwellings Relief (MDR) was made in respect of the Property: it might have been claimed in respect of the house and barn, and perhaps even the studio (if capable of habitation). 

HMRC contended that, at the effective date of the transaction, the property was one that consisted entirely of Residential property and that higher rates of SDLT applied.

• Mr Gibson's professional advisers had said that as an enquiry had been opened he could advance a late claim for MDR.
• HMRC also denied MRD as over a year had passed since their original SDLT return had been filed and it was too late to amend the SDLT return meaning that no claim was possible for MDR. They issued a Closure Notice for SDLT of £153,000 which represented an increase of £83,500.

The taxpayer Appealed that decision

The First Tier Tribunal concluded that the Property was residential at the time of the purchase. That was not too difficult, it was a converted old farm and its buildings were converted under residential planning permission, there was no evidence of any non-residential or other use at the time of the purchase, 

The nature of the field/paddock was a much more perplexing issue. The question was whether it was in use as garden or grounds of a residential property at the time of purchase.

• The property had once been a farm and the field had been grazed in the four years previously, although was not being physically grazed at the date of purchase because it was used for summer grazing. It was intended to graze it after purchase, not that future use affects the decision.
• The land had been sold by a developer who had applied for planning and the local council had confirmed the change of use of land from agriculture to residential curtilage before the purchase. However, nothing had been done to the land for the legislation to confirm that it was residential.
• The tribunal made a review of the case law to determine whether the paddock was a garden or grounds and concluded that as the land was not actively and substantially exploited on a commercial basis or in another separate use it must be residential.

The tribunal also confirmed that it was too late to make an appeal in respect of MDR too.

The appeal was dismissed.

Comment

The legislation says that residential land is "land that is or forms part of the garden or grounds of a [residential] property". It's not abundantly clear how a field which was always farmland can become 'grounds' just because it was not actually grazed at the date of purchase. After all, most fields are not actively grazed all year. Perhaps the tribunal was swayed by the estate agent's details and the thought of an equine property. Looking at this from the opposite end, there seems to be very little evidence of residential use. Thankfully this is an FTT decision and does not set any precedent. It's worth a detailed read-through to understand the challenges in these cases. 

It was a pity about the MDR claim, strange that it was not picked up by the conveyancer.

Useful guides on this topic

SDLT: Multiple Dwellings Relief
What is Multiple Dwellings Relief (MDR) for Stamp Duty Land Tax purposes? When does it apply and how is it claimed?

SDLT: MDR & Annexes Tool
Stamp Duty Land Tax (SDLT) Tool, if you are buying two or more properties in a single transaction use this tool to see if you meet the qualifying conditions and you may be able to claim both Multiple Dwellings Relief and relief from the Higher Rate Charge.

SDLT: Residential property & dwellings
What is a 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)?

How to appeal an HMRC decision
Disagree with an 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?

External links

James George Gibson v HMRC [2023] TC8869