SDLT: land attached to property is residential

In (1) David Hyman and Sally Hyman (2) Pensfold (3) Craig Goodfellow and Julie Goodfellow v HMRC [2021] UKUT0068 the Upper Tribunal (UT) considered the definition of residential property and determined that residential rates of Stamp Duty Land Tax (SDLT) should apply to the purchase of three different properties that all included substantial plots of land.

This case was a joint appeal by the appellants against First Tier Tribunal (FTT) decisions which determined that land sold with a house was subject to SDLT at residential rates. The appeal was on the grounds that the FTT had erred in law, and that not all the land attached to the properties should be viewed as residential property for SDLT purposes.

The Law

SDLT is charged on the acquisition of a chargeable interest in land. 

If the land consists entirely of residential property, then SDLT is charged at Residential rates, whereas if the relevant land consists of, or includes, land that is not residential property, SDLT is charged at non-residential rates.

Background

Details of the properties in each case were as follows:

• Hyman: House and 3.5 acres near St Albans which included:
  • The house and a rectangular cultivated garden and a 'secondary garden' which was agreed as residential property.
  • A dilapidated barn and a meadow which the appellant argued was not residential property.
• Pensfold: House and 27 acres of land in Surrey which included:
  • A house and garden land that was agreed as residential property.
  • Excess land that was alleged to be subject to a grazing licence in favour of a third party which the appellant argued was not residential property.
• Goodfellow: House and 4.5 acres of land in Hampshire which included:
  • Gardens and swimming pool which was agreed as residential property.
  • A garage office, stable yard and paddocks which the appellant argued were not residential property.

The FTT decisions

Hyman: the FTT found that the entire property was residential property as:

• Residential property means a building that is used as a dwelling and land that forms part of the garden or grounds of the dwelling, including any buildings on such land.
• Grounds is intended to have a wide meaning and should mean land attached to, or surrounding, a house which is occupied with the house and available for the occupants to use but would not include land if it is used for a separate (e.g. commercial) purpose.

Pensfold: the FTT found that the entire property was residential property as:

• There was no grazing licence over the land and as such the whole property was residential.

Goodfellow: the FTT found that the entire property was residential property as:

• The land surrounding the house was essential to its character, to protect privacy, peace and enjoyment of its country setting.
• The garage, paddock and stable yard were residential property as:
  • The garage office was suitable for domestic use and was wholly residential in character.
  • There were no commercial operations in place in the paddock and stable yard.
  • The paddock and stable yard were necessary for the enjoyment of the equestrian property.

UT decision

The UT dismissed the appeals as:

• While a connection was required between the garden or grounds and the dwelling, there was no definition of what that connection was.
• Land purchased with a property did not need to be required for the reasonable enjoyment of the dwelling in order to be considered residential property for SDLT purposes, dismissing the taxpayers' argument.
• The UT also endorsed the approach taken in HMRC's SDLT manuals.

Useful guides on this topic

SDLT: Residential property & dwellings
What is residential property for Stamp Duty Land Tax (SDLT)? What tax rate applies?  What garden and grounds are subject to higher rates of SDLT?

SDLT residential definition not as narrow as for CGT
In Mr David Hyman and Mrs Sally Hyman [2019] TC7271 a Stamp Duty Land Tax claim that a property sitting in 3.5 acres of land was ‘mixed use’ and not residential failed.

External links

(1) David Hyman and Sally Hyman (2) Pensfold (3) Craig Goodfellow and Julie Goodfellow v HMRC [2021] UKUT0068

Dr Craig & Mrs Julie Goodfellow v HMRC [2018] TC7272