09 Jul 2024

More on ‘grounds’ – and a procedural escape route?


We commented in May on a case which underlined that for Stamp Duty Land Tax (‘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 First-tier Tribunals (‘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 (on which we commented here and which is one of the very few taxpayer successes before the FTT in this area).  The Upper Tribunal (in [2024] UKUT 188 (TC)) have subsequently upheld the FTT decision in Suterwalla as one which the FTT was entitled to reach on the evidence: though it should also be noted that even the taxpayer’s 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 was 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 on 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.

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