In Jessica Harjono & Anor v  HMRC [2024] TC09107, another taxpayer failed to persuade the First Tier Tribunal that a paddock let on a market rate rent from the day of completion was non-residential land.

Horses in paddock

The appellants purchased a property with three acres of land and gardens, including a 1.5-acre paddock. The paddock was purchased under a separate title but had long formed part of the property.

The paddock was next to the house, but not visible from it and had previously been let for grazing. Upon completion was let to a third party as a horse grazing paddock.

The rent paid for grazing was £50 per month: the going rate for grazing.

A Stamp Duty Land Tax (SDLT) adviser told the buyer that SDLT was paid on the basis that the paddock was Non-residential and therefore the property was mixed-use. This meant that the low rate for non-residential property was paid.

HMRC disagreed with this analysis and made an SDLT assessment for the residential rate.

The taxpayer appealed HMRC's decision to the FTT.

The FTT reviewed the facts and observed that in these, "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".

It applied the now established ‘multifactoral’ tests for these cases, emphasising that, “Land does not cease to be residential property merely because the occupier of a dwelling house could do without it.” 

The tribunal found the land existed as grounds to the property, as such the whole of the property and its three acres were residential in nature for SDLT.

The appeal was dismissed.

Useful guides on this topic

SDLT: At a glance, Stamp Duty Land Tax, rates & allowances
What is Stamp Duty Land Tax (SDLT)? What are the rates of Stamp Duty Land Tax (SDLT)?

SDLT: Residential property & dwellings (subscriber guide)
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 property higher rate: At a glance
What Stamp Duty Land Tax (SDLT) rate applies for the purchase of a second home? What is the SDLT higher rate? Are there any reliefs from the SDLT higher rate?

External links

Jessica Harjono & Anor v  HMRC [2024]  TC09107