Jessica Harjono and another v HMRC [2024] UKFTT 228 (TC) is the latest in a long line of cases where a purchaser of property has sought to show that what is ostensibly a residential property has some non-residential element such as to unlock the lower rates of Stamp Duty Land Tax (‘SDLT’). Again, HMRC have prevailed.
As with many such cases, the question revolved around whether some part of the land purchased with a house could fairly and accurately be described as not constituting ‘grounds’ of the house.
In this case, a paddock formed part of the land attached to a six-bedroomed barn conversion in Oxfordshire. Before buying the property, the purchasers had agreed that in return for a modest monthly payment, a neighbour could graze her horse in the paddock. They argued that that meant that the paddock was not part of the grounds and was thus ‘non-residential’.
In a case in 2019, the First-tier-Tribunal said: ‘Land would not constitute grounds to the extent that it is used for a separate, eg commercial purpose. It would not then be occupied with the residence, but would be the premises on which a business is conducted’.
Advisers have latched onto that phrasing to argue that any letting of land automatically means that the land cannot be ‘grounds’. Harjono reins that back (no pun intended) somewhat:
“Commercial” is a weasel word. In mixed-use situations it is increasingly being asserted that any letting of part of a property for a market rent is commercial and, as if by magic, the land leaves the residential pot and turns up in the mixed-use pot. As the cases show, this simplistic analysis is being rejected by the courts.
When looking at the use to which land is put, simply inserting some form of “commercial” agreement between a landowner and a third party does not, of itself, generate a use which is of significant weight in the multifactorial evaluation. One needs to look through that agreement and consider the end use of the land as well.
In the context of this appeal, we accept that the grazing agreement was on arm’s length terms, and the rent was a market rent.
But the use of the paddock for grazing a pony is the paradigm use of a paddock. And this is the case whether that use is by a third party under a grazing agreement negotiated on arm’s length terms and carrying a market “rent”, or whether it is by the owners themselves.
This can be summarised: the grounds of your property don’t necessarily stop being the grounds merely because you let someone else have the use of them: something more than that is needed to denature them. Put that way, it’s obvious.
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