Garden and grounds for SDLT

In what is apparently the first case on this subject, the First-tier Tribunal (FTT) has held that 'grounds' of a residential property has a wide meaning for SDLT purposes, resulting in higher residential rates (up to a maximum of 15%) on the purchase of a house with a sizeable amount of land.

In Hyman v HMRC TC 7271, Mr and Mrs Hyman bought a property comprising a farmhouse, a barn, a public bridleway and 3.5 acres of land (including two gardens and a meadow). They initially paid SDLT on the basis that the property was wholly residential, but later sought to reclaim part of the tax on the basis that lower rates for mixed-use property applied because the barn, meadow and bridleway were not residential. For SDLT purposes the definition of residential property includes land that forms part of the gardens and grounds of a residential dwelling, including any building or structure on that land and if any part of the land is not residential property it will be ‘mixed use’ and taxable to SDLT at a maximum rate of 5%.

The taxpayers sought to argue that the whole property was not residential because the bridleway was used by the public on a daily basis, so could not be used for private or recreational purposes, and similarly that the meadow and barn could not be used for ornamental or recreational purposes. However the FTT decided that the ordinary meaning of the word ‘grounds’ applied so that it comprised land that is attached to, or surrounding a house which is occupied with the house and available to the owners to use as they wish. There was no requirement for the owners to actively use the land and public access to the bridleway, and separation of part of the grounds by hedges or fences, did not prevent the land from being residential grounds. The FTT did however confirm that land would not constitute grounds if it was used for a separate, commercial purpose.

In reaching the decision the FTT considered guidance and case law concerning the definition applicable in respect of main residence relief from CGT, before concluding that they were not in point because, unlike the CGT definition, the SDLT definition did not impose a restriction on the extent or the use of the land.