A recent case that was taken to the First-tier Tribunal has determined that the grounds of a farmhouse are residential property under SDLT. This means that buildings such as a barn, meadow and bridleway will all be caught in the valuation for full SDLT rates.
The Case – Hyman v HMRC
A taxpayers applied for a refund of circa £35,000 on SDLT they had paid on the basis that a farmhouse set on 3.5 acres of land was wholly residential. Upon reflection of their payment, they later claimed that parts of the land were actually non-residential and should be granted a refund.
The land in question comprised of a barn, meadow and public bridleway. The bridleway was used by the family inline with public use and the meadow was used to walk their dog and keep chickens. The barn was used as storage and a conversion into a residential building could not take place without planning permission.
As SDLT is charged at lower rates on the entire purchase price where the land is either non-residential or includes land that is non-residential, there was a requirement reason for the distinction as to whether the land was residential or not is that. By claiming it was non-residential, it would drop the SDLT charge on the potential sale/purchase of the land.
First-Tier Tribunal Ruling
The judge ruled that the word “grounds” has, and is intended to have, a wide meaning. Its ordinary meaning is land attached to or surrounding a house which is occupied with the house and is available to the owners for them to use. It does not imply a requirement for active use, grounds need not be used for any particular purpose and can, as in this case, be allowed to grow wild. Nor is it fatal that other people have rights over the land. The fact that there is a right of way over grounds might impinge on the owners’ enjoyment of the grounds, but such rights do not make the grounds any the less of the taxpayer residence.
Land would not constitute residential grounds to the extent that it is used for a separate commercial purpose. It would not then be occupied with the residence, but would be the premises on which a business is conducted.
The Application
In order to show that any land is non-residential, there needs to be a clear commercial use. Land that is unused, overgrown or where the public have a right of use is simply not enough to gain an SDLT reduction. It is therefore vital that advisers obtain all the relevant facts before claiming for reduced SDLT tax rates.
A full transcript of the First-Tier Tribunal’s findings can be found here – Hyman v HMRC
