In Mr Taher Suterwalla and Mrs Zahra Suterwalla v HMRC [2024] UT 00188, the Upper Tribunal (UT) upheld the First Tier Tribunal's (FTT's) decision that a paddock was not part of the grounds of a residential property. 

Horses in paddock

  • The couple purchased a family house with an indoor swimming pool, tennis court, pavilion and paddock, in a sought-after location with far-reaching views.
  • They let the paddock out on the day of completion for commercial purposes (horse grazing) to a third party.
  • They filed a Stamp Duty Land Tax (SDLT) return on the basis that the paddock was non-residential property.
  • HMRC opened an enquiry and issued a Closure notice, stating that the paddock was part of the grounds of the house and applied the Residential rate of SDLT to the whole purchase.
  • The taxpayers Appealed to the First Tier Tribunal (FTT). The FTT agreed with the taxpayers that the paddock was not part of the grounds of the house. It was non-residential for SDLT purposes.
  • HMRC appealed to the Upper Tribunal (UT) on grounds that the FTT erred: 
    • In taking the grazing lease into account.
    • In deciding that the paddock was not part of the house's grounds, even if the grazing lease was considered.

The UT found that:

  • The grazing lease should not have formed part of the analysis. It did not exist at the time of completion and there was no evidence of any previous use of the paddock for commercial purposes.
  • Whether or not the couple would have preferred to buy the property without the paddock had no bearing.
  • The FTT's conclusion that the paddock was not part of the house's grounds at completion was supported by its other findings.
  • Disregarding the lease and weight assigned to whether or not the taxpayers wished to acquire the paddock, the FTT found that the paddock: 
    • Had a separate distinct title at the Land Registry from the dwelling house, gardens and tennis court.
    • Was not close to or visible from the house and access was via a small gate.
    • Did not support the dwelling house, garden or tennis court.
    • Did not form an integral part of the property.
  • The UT upheld the FTT’s findings. It was entitled to conclude that the paddock, without the grazing lease, was not part of the grounds of the house. 

The UT dismissed HMRC's appeal. 

Editorial comment

The UT's conclusion does not mean that a grant of a grazing lease (or other interest) after completion can never be considered in such a case. The subsequent use of land may be evidence of its nature or character at the time of completion. It's important to consider the facts of the case. As noted by the UT:

"For example, the grant of grazing lease by new owners after completion may formalise an informal arrangement between the previous owner and a neighbour which allowed horses to be kept and grazed on the land or be a reinstatement of historic commercial use."

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?

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

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?

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?

Pony paddock not residential for SDLT
In Mr Taher Suterwalla and Mrs Zahra Suterwalla v HMRC [2023] TC8826, a paddock acquired on the purchase of a residential property was let out commercially on the same day as the purchase was completed, so for Stamp Duty Land Tax (SDLT), was the paddock required for the reasonable enjoyment of the dwelling having regard to its size and nature or not?

External links

Mr Taher Suterwalla and Mrs Zahra Suterwalla v HMRC [2024] UT 00188