Further examples of the difficulties of claiming non-residential SDLT rates – and a possible way of avoiding having to choose between MDR and non-residential rates.
We previously commented in May on the case of J Harjono and another v HMRC [2024] UKFTT 228 (TC) which underlined that for SDLT purposes the grounds of a property don’t necessarily stop being the grounds (so as to unlock ‘non-residential’ rates of SDLT) merely because you let someone else have the use of them.
Two further cases have now been heard – by differently-constituted FTTs – which between them seem to nail down the lid on claims of this kind.
Holding and another v HMRC [2024] UKFTT 337 (TC) involved the purchase of a country house with a cottage, staff flat and equestrian facilities ‘all nestled’ (as the estate agent predictably put it) ‘in approximately 40.6 acres’. The question was whether all of that 40.6 acres constituted ‘grounds’: in particular whether 24 acres of fields did so – especially ‘Field 11’ which was ‘not used for equestrian activities, even when there were 8 horses stabled at the Property ... could not be viewed from the Farmhouse and was used all year round for agricultural activities, namely the growing and cropping of grass for haylage’.
Even that was not enough to persuade the FTT that it was not part of the grounds. After listing the usual factors and noting that they will carry different weight according to the circumstances, the FTT opined that the most important factor was ‘the nature of the dwelling and the land, and the relationship between the dwelling and the land’. It thought it likely that the haylage arrangement did not mean that the land was used for agricultural purposes – rather, that it was an informal agreement which kept the field tidy and weed-free. It wasn’t, said the FTT, ‘unusual for a substantial country property to have grounds extending to many acres’. The fields were available for use by the occupiers and as such provided a benefit or amenity to the farmhouse.
It’s worth noting that the FTT referred to a forthcoming HMRC appeal in the Suterwalla case (which is one of the very few taxpayer successes before the FTT in this area). The Upper Tribunal ([2024] UKUT 188 (TC)) have subsequently upheld the FTT decision in Suterwalla as one which the FTT was entitled to reach on the evidence, although it should also be noted that even the defence counsel recognised that ‘it was perfectly possible that, another FTT in another case with similar facts might have reached a different conclusion’. Importantly, the Upper Tribunal noted that the grant of a commercial lease after completion (but on the same day) cannot of itself render the land non-residential: it can at best be evidence of its nature or character at the time of completion, for example by formalising an informal arrangement previously entered into by the vendor.
The second recent case is that of Lynch [2024] UKFTT 350 (TC). The purchase was of a substantial house plus a cottage, converted barn and 22 acres of land. At the time of completion of the purchase, a local farmer’s cattle grazed 18 acres of the land under an informal agreement made with the vendors and effectively assumed (or, at least, not immediately disavowed) by the purchasers: an arrangement which terminated only after the cattle proved troublesome, first by chasing the purchasers and then by breaking into a neighbour’s garden.
Here, the FTT (again after listing the usual factors) opined that ‘the actual use of the land is a very, if not the most, important factor’. It concluded that the land was ‘not used for a purpose so separate and unconnected with the use of the dwelling as such as to take it out of the definition of “grounds”’.
There is one intriguing procedural
point in the Lynch case. Usually disputes
of this kind reach the FTT because HMRC
enquire into an SDLT return (either the
original return or an amended return filed
within the ‘amendment window’). In the
case of Lynch, the reduction in SDLT was
claimed not by this route but by making a
claim for ‘overpayment relief’ (albeit that
the claim was, curiously, made before the
‘amendment window’ expired and therefore
at a time when amending the return would
have been the more usual course). This may
have been with a view to ensuring that the
claim to multiple dwellings relief (MDR) –
which had been made in the SDLT return
(and which would have been incompatible
with a return or amended return asserting
that the property was non-residential) –
remained available if the overpayment relief
claim failed. If so, it may be a neat way of
avoiding the need to choose between MDR
and non-residential rates with the risk of
losing both.
Home >Articles > More on ‘grounds’ – and a procedural escape route?
More on ‘grounds’ – and a procedural escape route?
Further examples of the difficulties of claiming non-residential SDLT rates – and a possible way of avoiding having to choose between MDR and non-residential rates.
We previously commented in May on the case of J Harjono and another v HMRC [2024] UKFTT 228 (TC) which underlined that for SDLT purposes the grounds of a property don’t necessarily stop being the grounds (so as to unlock ‘non-residential’ rates of SDLT) merely because you let someone else have the use of them.
Two further cases have now been heard – by differently-constituted FTTs – which between them seem to nail down the lid on claims of this kind.
Holding and another v HMRC [2024] UKFTT 337 (TC) involved the purchase of a country house with a cottage, staff flat and equestrian facilities ‘all nestled’ (as the estate agent predictably put it) ‘in approximately 40.6 acres’. The question was whether all of that 40.6 acres constituted ‘grounds’: in particular whether 24 acres of fields did so – especially ‘Field 11’ which was ‘not used for equestrian activities, even when there were 8 horses stabled at the Property ... could not be viewed from the Farmhouse and was used all year round for agricultural activities, namely the growing and cropping of grass for haylage’.
Even that was not enough to persuade the FTT that it was not part of the grounds. After listing the usual factors and noting that they will carry different weight according to the circumstances, the FTT opined that the most important factor was ‘the nature of the dwelling and the land, and the relationship between the dwelling and the land’. It thought it likely that the haylage arrangement did not mean that the land was used for agricultural purposes – rather, that it was an informal agreement which kept the field tidy and weed-free. It wasn’t, said the FTT, ‘unusual for a substantial country property to have grounds extending to many acres’. The fields were available for use by the occupiers and as such provided a benefit or amenity to the farmhouse.
It’s worth noting that the FTT referred to a forthcoming HMRC appeal in the Suterwalla case (which is one of the very few taxpayer successes before the FTT in this area). The Upper Tribunal ([2024] UKUT 188 (TC)) have subsequently upheld the FTT decision in Suterwalla as one which the FTT was entitled to reach on the evidence, although it should also be noted that even the defence counsel recognised that ‘it was perfectly possible that, another FTT in another case with similar facts might have reached a different conclusion’. Importantly, the Upper Tribunal noted that the grant of a commercial lease after completion (but on the same day) cannot of itself render the land non-residential: it can at best be evidence of its nature or character at the time of completion, for example by formalising an informal arrangement previously entered into by the vendor.
The second recent case is that of Lynch [2024] UKFTT 350 (TC). The purchase was of a substantial house plus a cottage, converted barn and 22 acres of land. At the time of completion of the purchase, a local farmer’s cattle grazed 18 acres of the land under an informal agreement made with the vendors and effectively assumed (or, at least, not immediately disavowed) by the purchasers: an arrangement which terminated only after the cattle proved troublesome, first by chasing the purchasers and then by breaking into a neighbour’s garden.
Here, the FTT (again after listing the usual factors) opined that ‘the actual use of the land is a very, if not the most, important factor’. It concluded that the land was ‘not used for a purpose so separate and unconnected with the use of the dwelling as such as to take it out of the definition of “grounds”’.
There is one intriguing procedural
point in the Lynch case. Usually disputes
of this kind reach the FTT because HMRC
enquire into an SDLT return (either the
original return or an amended return filed
within the ‘amendment window’). In the
case of Lynch, the reduction in SDLT was
claimed not by this route but by making a
claim for ‘overpayment relief’ (albeit that
the claim was, curiously, made before the
‘amendment window’ expired and therefore
at a time when amending the return would
have been the more usual course). This may
have been with a view to ensuring that the
claim to multiple dwellings relief (MDR) –
which had been made in the SDLT return
(and which would have been incompatible
with a return or amended return asserting
that the property was non-residential) –
remained available if the overpayment relief
claim failed. If so, it may be a neat way of
avoiding the need to choose between MDR
and non-residential rates with the risk of
losing both.
