In Mike Lazaridis v HMRC [2024] TC09321, the First Tier Tribunal (FTT) ruled that 40 acres of fields were part of the grounds of a residential property, despite being used for commercial grass production by an unconnected third party under a formal licence agreement.
In February 2022, Mr Lazaridis purchased the freehold estate of a 106-acre property for £10,750,000.
- The property included a 40-acre area to the rear of the house referred to in this decision as the 'fields'. He self-assessed SDLT on the basis that the property was mixed-use.
- HMRC issued a Closure notice, stating that the fields formed part of the grounds of the house and that the property was entirely Residential. As a result, HMRC concluded that Mr Lazaridis owed an additional £1,214,250 in SDLT.
- The taxpayer Appealed to the First Tier Tribunal (FTT), arguing that the fields were not 'grounds' of the house, as they served, and continue to serve, a distinct purpose unconnected with the house.
The FTT conducted a multifactorial evaluation and determined that the fields formed part of the grounds of the house:
- The fields and house have been under common ownership since at least 1980.
- Despite licence restrictions, the seller retained access to the fields and could have easily terminated the licence, with minimal consequences.
- Growing and cutting grass is non-intrusive, taking place briefly each year near the dwelling.
- The well-maintained fields enhanced the house's use as a dwelling, with the licence fee being negligible compared to the property's value. The real benefit was ensuring the fields remained in good condition.
- The fields comprise 40% of the total area and are proportionate to the property's size. They are close to and partially visible from the house, enhancing its peace, privacy, and rural character.
- Marketed as a villa with three cottages in a mature parkland estate, the fields were included under 'Gardens and Grounds' and lie between the house and the property's woodland.
The FTT dismissed the appeal.
Editor's comment
The FTT noted that they followed the approach of the Upper Tribunal in Mr Taher Suterwalla and Mrs Zahra Suterwalla v HMRC [2024] UT 00188, stating that HMRC's SDLT Manual serves as a fair and balanced starting point for assessing whether land forms part of the gardens or grounds of a dwelling.
The FTT addresses whether land can be considered 'grounds' if used commercially. SDLTM00460 states that, "Although all factors must be taken into account and weighed against each other, the use of the land is potentially the most significant indicator... It would be expected that the land had been actively and substantively exploited on a regular basis for this to be the case."
The FTT emphasised that the SDLT Manual is not legislation. Under the facts of the case, the question of whether there is active and substantive exploitation regularly is not determinative. The more important consideration was that the use of the fields for commercial grass production (under the licence agreement) primarily served to maintain the fields rather than generate financial gain.
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
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: Residential property higher rates
A guide to the Stamp Duty Land Tax (SDLT) higher rate charge on residential property, when it applies and what reliefs are available to exempt buyers from the charge.
How to appeal an HMRC decision
Disagree with a HMRC decision? How to appeal, what type of decision can you appeal, what are your different options when you disagree with HMRC? What are the key steps in making an appeal?
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