Hyman and another v Revenue and Customs Commissioners
| Jurisdiction | England & Wales |
| Judgment Date | 17 February 2022 |
| Neutral Citation | [2022] EWCA Civ 185 |
| Year | 2022 |
| Court | Court of Appeal (Civil Division) |
[2022] EWCA Civ 185
Lord Justice Lawson, Lady Justice Simler and Lord Justice Snowden
Court of Appeal (Civil Division)
Stamp duty land tax (SDLT) – Meaning of residential property – Was there an objective quantitative limit on extent of garden and grounds – Finance Act 2003 (FA 2003), s. 116(1)(b) – No– Appeal dismissed.
The decision of the Upper Tribunal ([2021] BTC 515) and dismissing the appeal, the Court of Appeal held there was no objective quantitative limit on the extent of the garden or grounds falling within the definition of “residential property”.
This was a joint appeal by four of the five taxpayers (Mr and Mrs Hyman and Mr and Mrs Goodfellow) who had unsuccessfully appealed to the Upper Tribunal against decisions of the First-Tier Tribunal ([2019] TC 07271 and [2019] TC 07507, respectively) that parts of the grounds of their respective dwellings were non-residential property and hence that they were entitled to the lower non-residential rates of SDLT on their purchases.
The Hymans had acquired a house and 1.42 hectares (3.5 acres) of land. Outside the rectangular cultivated garden in which the house was situated, was a large barn in disrepair, a “secondary garden” and a meadow, incorporating a bridleway. They had argued that the meadow and bridleway and the barn were not residential property.
The Goodfellows had acquired a house and 1.82 hectares (4.5 acres) of land, comprising gardens, a swimming pool, garages, a stable yard and paddocks. They had argued that a room above the garage, the stable yard and paddocks were not residential property.
FA 2003, s. 116(1)(b) provides that “residential property” includes land that is or forms part of the garden or grounds of a [dwelling].
In both cases, the FTT had found that the entirety of the land fell within that definition. The Upper Tribunal upheld those decisions.
Before the Court of Appeal, counsel for the appellants argued that given the brevity of the statutory language and the resulting frequent disputes between taxpayers and HMRC, a “workmanlike and coherent test” was required. He suggested that that test should be whether the land in question was required for the “reasonable enjoyment” of the dwelling. In both the cases at issue, he argued that the extent of the garden or grounds exceeded what was needed for reasonable enjoyment.
He cited in aid the analogous and strongly similar legislation (now repealed) for stamp-duty disadvantaged areas relief (FA 2002, s. 92B) in respect of which the Inland Revenue (as it then was) had stated, in Statement of Practice SP 1/03, that it would apply a test similar to the capital-gains test in Taxation of Chargeable Gains Act 2002 (TCGA 2002), s. 222(3)), namely limiting the garden and grounds to what was required for reasonable enjoyment of the property. He said that the anticipatory statement by the Financial Secretary to the Treasury in the Finance Bill 2002 debates was what Parliament must have had in mind when considering Finance Bill 2003 also.
SP 1/03 did not even exist in draft form when Parliament was considering former FA 2002, s. 92B. It therefore fell outside the principle of statutory construction in Bennion, Bailey and Norbury on Statutory Interpretation (8th ed), para. 24.17, that guidance available in draft during the passage of a Bill could form part of the relevant contextual material to be borne in mind in construing the resulting Act.
Furthermore, the Supreme Court had, in R (on the application of O) v Secretary of State for the Home Department [2022] UKSC 3, stated that external aids to interpretation had to play a secondary role. None of them displaced the meanings conveyed by the statutory words where those were clear and unambiguous and did not produce absurdity.
The guidance on which the appellants relied had been given in the context of stamp duty. SDLT was an entirely new tax invented to replace stamp duty because of the former's unsatisfactory nature. Second, HMRC's guidance did not purport to be an interpretation of former s. 92B – at best, it was guidance as to how HMRC would apply a test in practice. Third, whereas TCGA 1992, s. 222(3) contained a “bright-line” limit on the amount of garden or grounds that would automatically qualify for relief, neither former s. 92B nor now FA 2003, s. 116(1)(b) contained that limitation nor any possibility of relaxation. In any case, s. 222(3) and s. 116(1)(b) performed entirely different functions. section 116 was concerned with characterising property as either residential or non-residential. Land did not cease to be residential merely because the occupier of a dwelling house could do without it.
Counsel for the appellants wished in effect to imply into an Act a limitation that was absent. The words of s. 116 were clear and unambiguous and did not produce absurdity. The qualification suggested by counsel was not there.
The appeal would be dismissed.
With due respect to distinguished counsel for the appellants, one has to wonder why on earth they proceeded with this appeal, having been comprehensively defeated at both Tribunal stages. As Lord Justice Lawson, who gave the judgment, said, they were trying to write words into the legislation that were simply not there.
It ought to be noted that disadvantaged-areas relief did also exist for SDLT (in former FA 2003, Sch. 6) before it was abolished entirely in 2013, having been abolished for non-residential property since 2005. It used the same test as s. 116(1)(b) to distinguish between residential and non-residential property. Before the Upper Tribunal, the same counsel had also unsuccessfully advanced HMRC's guidance (removed in 2019) relating to the relief, which repeated the SP 1/03 guidance. He did not rely advance that argument before the Court of Appeal, however.
Patrick Cannon (instructed by Cornerstone Tax Limited) appeared for the appellants
James Henderson & Calypso Blaj (instructed by HMRC Solicitor's Office) appeared for the respondent
[1] The acquisition of an interest in land may attract stamp duty land tax (“SDLT”). SDLT is charged at a different rate depending on whether the relevant land consists entirely of residential property on the one hand; or consists of or includes property that is not residential property on the other. The former rate is higher than the latter. The definition of “residential property” includes “land that is or forms part of the garden or grounds” of a dwelling. The issue on this appeal is whether there is an objective quantitative limit on the extent of the garden or grounds that fall within the definition.
[2] The UT (Morgan J and Judge Cannan) held that there was not. The taxpayers in these cases were therefore liable to pay SDLT at the higher rate. Their decision is at [2021] BTC 515. The taxpayers appeal.
[3] SDLT is chargeable under the Finance Act 2003 on land transactions. Any acquisition of a chargeable interest is a land transaction: section 43(1). A chargeable interest is an estate, interest, right or power in or over land: section 48(1)(a). Whether a land transaction is chargeable to SDLT is governed by section 49. The transactions in the current appeals are all chargeable transactions.
[4] The rate at which SDLT is charged is governed by section 55. There are two tables of charge: Table A and Table B. Table A applies where the relevant land consists entirely of residential property. Table B applies where the relevant land consists of or includes land that is not residential property.
[5] section 116, which is the key provision in these appeals, defines residential property. It relevantly provides:
(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.
[6] The question we have to decide is the meaning of paragraph (b) of that definition.
[7] The relevant facts can be briefly stated.
[8] Mr and Mrs Hyman own a property known as “The Farmhouse”, near St Albans. The property comprised a house and 3.5 acres of land. They bought the property on 23 October 2015. The house and land formed a roughly rectangular piece of land. The house was situated within a rectangular cultivated garden. Outside this garden was a large barn in a bad state of repair. There was a further garden referred to as a “secondary garden”. Most of the rest of the property was a meadow. On one side of the property was a bridleway which was separated from the garden and the meadow by hedges.
[9] Dr and Mrs Goodfellow own a house at Heathermoor House, Hale Purlieu, Fordingbridge, Hampshire. The property consists of a house and 4.5 acres of land. They bought the property on 21 March 2016. The land comprised gardens, a swimming pool, garaging, a stable yard and paddocks. It was argued on behalf of Dr and Mrs Goodfellow that a room above a garage had been used by the vendor as an office and was not residential property. It
[10] In each case the FTT found that the entirety of the land fell within section 116(1)(b). Those decisions were based on the FTT's characterisation of the land in question, simply as a question of fact. The decisions of the FTT were upheld by the UT.
[11] Mr Cannon, on behalf of the taxpayers, stressed the brevity of the statutory language. He gave us a number of examples, drawn from his own...
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