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Neither gardens nor grounds

Posted on 13 December 2023

Over recent years, the Tax Tribunal has been full of cases where HMRC have challenged buyers claiming the "mixed-use" rate of Stamp Duty Land Tax (SDLT) on UK property purchases. It is unsurprising that this has become a contentious area: the difference in cost to a buyer can be huge, with the top rate for residential property being 17%, compared to the 5% mixed-use rate.

"Residential property" for SDLT purposes means a dwelling and its “garden or grounds". Mixed-use/non-residential property is defined in the negative; it simply comprises property that falls outside the definition of residential property. So, if you can successfully argue that you are buying more than a house and its "garden or grounds", you may be able to argue that a property is mixed-use. HMRC has taken a wide view of what "garden or grounds" means.

Whilst most recent cases in this area have been one-way traffic, Suterwalla and another v HMRC [2023] UKFTT 450 (TC) marks a departure from the many HMRC successes. In this case, the property comprised a dwelling house, garden and tennis court, along with an adjoining paddock. The First Tier Tribunal (FTT) held that the paddock constituted neither "garden nor grounds" of the dwelling in question, resulting in SDLT being payable at the mixed-use rate. In deciding the case, the FTT considered anumber of factors, including:

  • The lack of visibility and proximity of the paddock from the house and gardens;
  • The paddock possessing separate title to the remaining property; and
  • A grazing lease granted over the paddock for a rent of £1,000 per annum.

The emphasis the FTT placed on the lease is noteworthy, as it represents a departure from previous case law. The law is clear that the property must be examined as a snapshot on the "effective date" – usually the completion date. The appellant seems to have successfully argued that, even though the lease was granted after the time of completion on the completion date, it still needed to be considered because it was granted later on the same day. This is a controversial point, and it is doubtful, in our opinion, that a higher court would agree with this.

As always, every case is heavily fact-dependent, and it should always be remembered that Tribunal cases have no binding authority. So, this case is unlikely to lead to a slew of taxpayer "wins". Nonetheless, Suterwalla serves as a reminder that it is possible, with the right set of uncontrived facts, for a taxpayer to succeed on a mixed-use SDLT claim where a house is being purchased with land which clearly goes beyond "garden or grounds".

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