Grazing land does not make equestrian property mixed use for SDLT

In Sangeeta Modha v HMRC [2023] TC8936, the First Tier Tribunal (FTT) held that a field used under an informal grazing agreement did not make a house with equestrian facilities a mixed-use property for Stamp Duty Land Tax (SDLT). It was a second residential property so higher rates of SDLT applied.

Ms Modha purchased a farm comprising a five-bedroomed house with gardens, stables, garages, a menage, tack room, paddock, and an eight-acre field.

• She initially paid Stamp Duty Land Tax (SDLT)  at the Residential higher rates applying to the acquisition of a second residential property.
• She later amended her SDLT return to show the property as mixed-use, subject to SDLT at non-residential rates, and claimed a refund of SDLT of £69,450. This was on the basis that the eight-acre field was non-residential property as it had a commercial use.
• The previous owners had a verbal informal grazing agreement with a third party (Mr Nourish) whereby he maintained the land and in return was allowed to keep the resulting hay/silage. No payments were made between the parties.
• The appellant put in place a licence agreement with a separate third party (Mr Vyas) under which Mr Vyas paid £25 a month for access to the field for grazing and sheepdog training. This was subject to a small area being reserved for the appellant to grow vegetables. This agreement was found to have been signed over a month after the property acquisition date.
• HMRC issued a closure notice concluding that the correct rate was that originally applied by Ms Modha i.e. the residential rate for a second dwelling. Ms Modha Appealed the decision. 

The FTT dismissed the appeal finding that there was no mixed use of the property:

• The grazing agreement between the previous owners of the property and Mr Nourish did not represent commercial use and the transaction between the parties was instead a ‘barter of convenience’.
• Whilst the licence between the appellant and Mr Vyas did represent commercial use, it was not in place on the date of acquisition. The field had no function unconnected with the dwelling on the date of the transaction, therefore there was no basis on which to conclude that the field was anything other than available for use with the dwelling, and part of the grounds.

Useful guides on this topic

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

SDLT: Amending returns
How do I amend an SDLT return?  When can I amend an SDLT return?  How do I claim an SDLT refund? How do I deal with contingent consideration?

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?

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 link

Sangeeta Modha v HMRC [2023] TC8936