Hyman and Another
| Jurisdiction | UK Non-devolved |
| Judgment Date | 17 July 2019 |
| Neutral Citation | [2019] UKFTT 469 (TC) |
| Date | 17 July 2019 |
| Court | First Tier Tribunal (Tax Chamber) |
[2019] UKFTT 469 (TC)
Judge Marilyn McKeever
Mr Graham Callard, Counsel, instructed by Cornerstone Tax Limited, appeared for the appellant
Mr Pirimi McDougall-Moore, officer of the Respondents, appeared for the respondents
Stamp duty land tax – Tax paid on basis that property wholly residential – Claim for refund as property in fact mixed-use – Meaning of grounds – FA 2003, s. 116(1)(b) – Property correctly classified as residential – claim refused.
Dismissing the claim, the First-Tier Tribunal (“FTT”) held that a barn, meadow and bridleway, forming part of the appellants' 3.5 acre property and not used by the appellants for private or recreational purposes, nevertheless constituted part of the garden or grounds and the property was thus wholly residential.
The appellants purchased a property with grounds of an area over 3.5 acres (1.42 ha), on which they paid stamp duty land tax (“SDLT”) at the higher rates applicable to residential property under FA 2003, s. 55, Table A. They subsequently claimed a refund of tax on the grounds that the property was mixed-use and therefore the lower rates of Table B should have applied.
The appellants contended that a barn, meadow and bridleway within the property were not garden or grounds because they were physically separated from the dwelling and could not be used for ornamental or recreational purposes. Furthermore, the barn was classified as a non-residential building that would need planning permission for change of use before it could be classified as residential.
HMRC, on the other hand, contended that “grounds” within the meaning of FA 2003, s. 116(1)(b), meant simply the land surrounding a house and available as amenity for the dwelling and the use to which the land was put was not relevant.
In the absence of a statutory definition, the FTT's attention was drawn to HMRC Guidance on the meaning of “grounds” in the Capital Gains Tax Manual (there being none in the Stamp Duty Land Tax Manual) and to two cases involving the interpretation of “garden or grounds” in cases relating to principal private residence relief for capital gains tax (“CGT”) purposes. The FTT judge observed that the CGT Guidance expressly allowed as grounds land that was unused or overgrown, was a paddock or orchard (unless put to significant business use) or land with a building on it (unless let or used in a business). The judge also considered the two cases cited by the appellants (Lewis (HMIT) v Lady Rook [1992] BTC 102 and Longson v Baker (HMIT) [2001] BTC 356) as unhelpful: the first because it involved a separate dwelling and the second because the SDLT legislation imposed no restriction on the extent of the land nor required it to be put to any particular use, unlike the CGT legislation (TCGA 1992, s. 222).
In the Tribunal judge's view, “grounds” for the purposes of SDLT was intended to have a wide meaning, more extensive than “garden” and did not require use for any particular purpose. The test that had to be applied in respect of the land was whether it was used for a separate, e.g. commercial purpose? If so, it would not then be occupied with the residence. However, the meadow and the bridleway, albeit that the latter had public rights of way over it, were a part of the grounds of the residence and the barn was a building on that land, hence the property as a whole could not be considered as being mixed-use. The claim for repayment therefore fell to be refused.
What was fatal to the appellants' case was that they could only cite CGT cases and precedents. The whole thrust of the CGT legislation is to limit the area that could be considered as grounds – hence the 0.5 hectare maximum in normal circumstances – whereas the SDLT legislation contains no such limitation and it could be said that the opposite was true – land that was grounds would qualify for the higher, residential rates.
On the facts also there was no indication that any part of the 3.5 acres was anything other than amenity for the house, whether tended or untended.
[1] This case is about a claim for the refund of Stamp Duty Land Tax (SDLT) by the Appellants. They paid SDLT at the time of purchase on the mistaken footing that the property they purchased was wholly residential. They now contend that the property has non-residential elements so that it must be regarded as mixed use and is entitled to the lower rates of SDLT which apply to non-residential and mixed use properties.
[2] I had before me bundles of documents provided by both parties and heard witness evidence from Mr Hyman.
[3] Statutory references are to Finance Act 2003 unless otherwise specified.
[4] The case turns on the interpretation of section 116 Finance Act 2003, which provides so far as material:
(1) In this Part “residential property” means–
- a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use, and
- land that is or forms part of the garden or grounds of a building within paragraph (a) (including any building or structure on such land), or
- an interest in or right over land that subsists for the benefit of a building within paragraph (a) or of land within paragraph (b);
and “non-residential property” means any property that is not residential property.
[5] Section 116 provides an exhaustive definition. If the property falls within any of paragraphs (a), (b) or (c) of subsection (1), the property is residential property. If the property falls outside those paragraphs, it is not residential property.
[6] This is relevant to the rate of SDLT chargeable determined by section 55, which, at the date of purchase provided:
(1) The amount of tax chargeable in respect of a chargeable transaction [ to which this section applies] is [determined in accordance with subsections (1B), (1C) and (2)].
(1A) This section applies to any chargeable transaction other than a transaction to which paragraph 3 of Schedule 4A or step 4 of section 74(1A) (higher rate for certain transactions) applies.
(1B) If the relevant land consists entirely of residential property … the amount of tax chargeable is determined as follows–
- Step 1
- Apply the rates specified in the second column of Table A below to the parts of the relevant consideration specified in the first column of that Table.
- Step 2
- Add together the amounts calculated at Step 1 (if there are two or more such amounts)….
Relevant Consideration
Percentage
So much as does not exceed £125,000
0%
So much as exceeds £125,000 but does not exceed £250,000
2%
So much as exceeds £250,000 but does not exceed £925,000
5%
So much as exceeds £925,000 but does not exceed £1,500,000
10%
The remainder (if any)
12%
(2) If the relevant land consists of or includes land that is not residential property, the amount of tax chargeable is the percentage of the chargeable consideration for the transaction determined in accordance with Table B below by reference to the amount of the relevant consideration.
Relevant Consideration
Percentage
So much as does not exceed £150,000
0%
So much as exceeds £150,000 but does not exceed £250,000
2%
The remainder (if any)
5%
[7] The important point to note is that Residential Table A applies only if “the relevant land consists entirely of residential property” and Table B applies “if the relevant land includes land that is not residential property” (emphasis added). This means that if the whole of the property falls within section 116(1)(a), (b) or (c), the higher rates in Table A apply, but if any part of the property falls outside those paragraphs (and so is not residential property), the whole of the property is mixed use and the lower rates in Table B apply.
[8] The Appellants contend that there are elements of their property which are not residential property, so the lower rates should apply to the whole purchase price.
[9] The burden of proof lies on the Appellants to show that they are...
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