In Marie Guerlain-Desai v HMRC [2024] TC9203, a taxpayer successfully persuaded the First Tier Tribunal that a 12-acre woodland behind a dwelling did not form part of its grounds for Stamp Duty Land Tax (SDLT) purposes. As such, the lower non-residential rate applied to the purchase.

Landscape

  • The taxpayer purchased Durford House, a six-bedroom property set in 16.6 acres of land. It included a triple garage, outbuildings and approximately four acres of private formal gardens with some 12 acres of mature woodlands at the rear.
  • The total consideration paid was £3,160,000 and the Stamp Duty Land Tax (SDLT) tax liability was £372,750 at the residential rate.
  • An SDLT agent assisted the buyer in claiming a refund of £225,250 plus interest because the woodland was non-residential and the transaction should be calculated at the non-residential rate.
  • HMRC raised an enquiry and concluded that the amended SDLT Return was incorrect because the woods were residential.
  • They issued a closure notice for the sum of £225,250 of Stamp Duty Land Tax, applying the Residential rate of duty.

The taxpayer appealed to the First Tier Tribunal (FTT).

It noted that:

  • The taxpayer's woodland was part of Durford Wood, an area with four woods which covered 30 acres and 35 properties.
  • The wood was managed by Durford Wood Landowners Limited (DWLL) which was a resident's company.
  • On purchase of the house, the taxpayer then became liable to make payments to DWLL and obligated to maintain the woods and abide by the decisions of the management company.
  • DWLL took charge of the taxpayer's property to secure payment of her obligations to the company.
  • The proposed budget for DWLL is discussed each year and all shareholders/residents are required to contribute to the annual running costs and to an adequate sinking fund and a road reserve fund for the maintenance of access roads.
  • Each property owner used the woods as could the general public and that use was considerable.
  • There was no view of its woods from the dwelling house, and the woodland was not fenced off.

The tribunal thought that the woodland appeared to have taken on a character more akin to a common and were not persuaded the woods were a key selling point nor essential to the dwelling house and private garden’s character so as to demonstrate a connection between the woods and the dwelling.

No one from HMRC had visited or seen the Property.

After considering extensive case law on this topic (see subscriber note: SDLT: Residential Property & Dwellings) FTT concluded that:

  • The woods did not form a positive function for the dwelling house
  • They were not passively integral to the grounds of the dwelling house providing exclusivity, privacy and security.
  • They did not serve a functional purpose for, or a use that supports, the dwelling.
  • In evaluating all the facts and circumstances, the tribunal considers that the woods do not comprise the gardens and grounds of the dwelling in terms of the legislation.

The taxpayer's appeal was allowed.

Useful guides on this topic

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 & dwellings (subscriber guide)
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: Residential property higher rate: At a glance
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?

External links

Marie Guerlain-Desai v HMRC [2024] TC9203