Bowen
| Jurisdiction | UK Non-devolved |
| Judgment Date | 21 November 2023 |
| Neutral Citation | [2023] UKFTT 992 (TC) |
| Court | First-tier Tribunal (Tax Chamber) |
[2023] UKFTT 992 (TC)
Tribunal Judge Anne Fairpo
First-Tier Tribunal (Tax Chamber)
Stamp duty land tax (SDLT) – Single acquisition of two leasehold properties – Meaning of residential property – FA 2003, s. 116(1) – Was one leasehold property non-residential and hence mixed-use rates of tax appropriate? – No – Appeal dismissed.
In Bowen [2023] TC 09003, the First-tier Tribunal dismissed the appellant’s claim that one of two leasehold properties he had acquired in a single transaction was non-residential property and hence that the non-residential (mixed-use) rates of SDLT applied.
The appellant purchased two adjoining leasehold properties – The Granary and Old Valley Farmhouse – formerly part of the National Trust’s Wimpole Hall estate in Cambridgeshire – in a single transaction with an effective date of 17 January 2019.
Although the two leaseholds were separately registered at the Land Registry, they were purchased together at the same time under a single contract for a single purchase price (not separately allocated between the two titles) from the same vendors. The vendors had so acquired them in turn from the National Trust. The Old Valley Farm consisted of a renovated farmhouse, outbuildings and over 5.5 ha of land. The Granary comprised the granary building and less than 0.5 ha of land.
The buildings formed four sides of a rectangle, with The Granary on one side and the Old Valley Farm buildings on the other three sides. The Granary was not physically connected to any of the Old Valley Farm buildings but was bordered on two sides by them. There was a single approach from the public highway to all the buildings.
The appellant filed a land-transaction return and paid tax at the lower rates applicable to non-residential and mixed-use property, on the basis that The Granary was not part of the garden or grounds of Old Valley Farmhouse and its use was non-residential. After an enquiry, HMRC amended his return to reflect that the property was wholly residential.
Taking the multi-factorial approach outlined by the Upper Tribunal in Hyman v R & C Commrs, the Tribunal isolated four factors put forward by the parties with respect to The Granary:
- Historic use.
- Use at the time of the transaction.
- Legal constraints.
- Proximity and nature of the land.
Historic use
The leases had been in common ownership since their creation by the National Trust, from which they were acquired by the vendors. The Granary was derelict when acquired by them and was still derelict when acquired by the appellant. However, the vendors had obtained planning permission in 1997 to bring it into residential use.
According to the appellant, the land connected to The Granary had been used for sheep grazing since 2016, but the sales particulars had made no mention of grazing rights.
Use at the time of the transaction
The appellant confirmed there were no sheep kept on the land at the effective date of the transaction but he had subsequently given permission for the farmer who had previously grazed the land to do so again. The Tribunal found that there was no agreement, formal or informal, in place at the effective date, and thus The Granary and its land were not in agricultural or other commercial use at that date.
Legal constraints
There was no binding agreement in place for the grazing and no rent had been charged. Moreover, there was a lease covenant on The Granary that prohibited its use for any trade or business. The permitted use was as a single private dwelling once it had been restored. In respect of the field, the covenant stipulated that it had to be used only as amenity land in connection with the use of the building itself as a private residence. There could be no assignment or underletting.
Proximity and nature of the land
The Granary was adjacent to Old Valley Farmhouse, sharing two of its three boundaries with it and was sufficiently close to it so as to be capable of being its grounds. It was relatively small compared to the land otherwise attached to Old Valley Farmhouse, so that it would not be disproportionate to consider it as part of the grounds.
The appellant had stated that he had acquired The Granary to prevent someone else from purchasing it, given its proximity to Old Valley Farmhouse. This confirmed that the use and function of The Granary at the effective date of the transaction was to support the use of Old Valley Farmhouse as a dwelling.
Decision
For all these reasons, The Granary formed part of the grounds of Old Valley Farmhouse for SDLT purposes at the effective date. This being so, the transaction was one involving solely residential property and the appeal would be dismissed.
Another unsuccessful claim for mixed use, and one with relatively weak arguments in its favour. It is interesting that the appellant had also made a claim for multiple-dwellings relief but abandoned it (wisely). He also placed reliance on HMRC guidance (HS283) on CGT private-residence relief, which at the time placed a restriction on the size of garden or grounds that would be considered as residential. He was reminded that guidance on CGT was of no use for SDLT and was in any case merely HMRC’s interpretation of the law. The Court of Appeal in Hyman had confirmed there was no objective quantitative limit on the extent of garden or grounds for SDLT purposes.
Comment by Zigurds G Kronbergs, Senior Tax Writer, Croner-i Ltd.
The appellant appeared in person
Ms McDonald, litigator of HM Revenue and Customs' Solicitor's Office appeared for the respondents
[1] The appellant (MR Bowen) appeals against a review conclusion letter in respect of a closure notice which increased the SDLT due on the acquisition of two leaseholds in a single transaction. The issue for this Tribunal was whether The Granary, which formed part of the transaction, was part of the grounds of Old Valley Farmhouse, the other part of the transaction. There was no dispute that Old Valley Farmhouse was residential property.
[2] The appellants also originally contended that the purchase of the leases of The Granary and Old Valley Farmhouse and argued that multiple dwellings relief should apply. These grounds of appeal were no longer maintained by the date of the hearing.
[3] On 17 January 2019, Mr Bowen and his wife purchased the leaseholds of Old Valley Farm and The Granary. The two properties were advertised together in a single set of sales particulars as a sale of two lots, and there is no suggestion in the sales particulars that the two lots might be separated.
[4] Old Valley Farm and The Granary are separate leaseholds, registered under two title numbers at the Land Registry. They were purchased together at the same time, under a single contract for a single purchase price of £1,625,000, from the same vendors. The...
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