Hyman and Others v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Neutral Citation | [2021] UKUT 68 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2021] UKUT 68 (TCC)
Mr Justice Morgan, Judge Jonathan Cannan
Upper Tribunal (Tax and Chancery Chamber)
Stamp duty land tax (SDLT) – Purchase of land with house – Whether subject-matter wholly residential property – Whether all of land part of garden and grounds – FA 2003, s. 55 and 116 – Yes – Appeals dismissed
The Upper Tribunal (“UT”), in dismissing the appeals, held that for land to constitute the garden and grounds of a house, it was not necessary for it to be needed for the reasonable enjoyment of the house.
The single ground of appeal in these joined appeals was whether part of the grounds purchased with the house in each case could be said not to form part of the garden or grounds of the dwelling. If that were so, the lower rates of SDLT applicable to mixed (partly residential and partly non-residential) property in Table B of FA 2003, s. 55 would apply to each transaction, instead of Table A, which applies to land consisting entirely of residential property.
In Hyman [2019] TC 07271, the land at issue consisted of a barn, meadow and bridleway outside a rectangular cultivated garden. In Pensfold [2020] TC 07609, it was grazing land and in Goodfellow [2019] TC 07507, the issue concerned the status of a room above a garage, a stable yard and paddocks. In each case, the First-Tier Tribunal (“FTT”) had found that the land at issue did form part of the garden or grounds, so that the transactions were entirely in respect of residential property.
FA 2003, s. 116(1)(a) provides that “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 s. 116(1)(b) adds land that is or forms part of the garden or grounds of such a building (including buildings or structures on such land) to the definition.
It was argued on behalf of the appellants that, in order to come within the definition of residential property in FA 2003, s. 116(1), the land in question had not only to be part of the garden or grounds of a house but also be needed for the reasonable enjoyment of the house, having regard to its size and nature. The FTT had not applied that additional test in any of the three cases and had therefore erred in law.
Counsel for the appellants based his argument on the history of the statutory provision and on previous HMRC guidance. FA 2003, s. 116(1), he said, derived from the former FA 2001, s. 92B, which applied for the purposes of the former disadvantaged-areas relief from stamp duty. That provision was then duplicated for SDLT in FA 2003, s. 116(1), which also applied to distinguish between residential and non-residential property for the purposes of the former SDLT relief for disadvantaged areas.
In connection with both the stamp-duty and SDLT disadvantaged areas reliefs, HMRC's Statements of Practice SP 1/03 and SP 1/04 contained the statement that HMRC would apply the test in TCGA 1992, s. 222(3) that the land in question included land needed for the reasonable enjoyment of the dwelling. In addition, HMRC guidance in its Stamp Duty Land Tax Manual, para. had repeated that the phrase “garden or grounds” included land needed for the reasonable enjoyment of the dwelling. He conceded that since 2019 HMRC guidance no longer included that statement but argued that HMRC had been right to conclude that the reasonable-enjoyment test had to be read in to FA 2003, s. 116(1). He maintained that the presence of the words “forms part of” showed that land could only form such part if it was needed for that reasonable enjoyment.
The UT rejected this contention. There was no wording in FA 2003, s. 116(1)(b) that imposed or even hinted at a requirement that the land should be needed for the reasonable enjoyment of the dwelling. One had only to contrast the wording of FA 2003, Sch. 6A, para. 7 (relief for certain acquisitions of residential property), where it was expressly stated that the “permitted area” in relation to a dwelling could be such larger area (larger than 0.5 ha) “as is required for the reasonable enjoyment of the dwelling”. Counsel's submission that there was a limitation on the operation of FA 2003, s. 116(1)(b) on the lines he suggested was “plainly wrong”.
As to HMRC guidance, it did not enjoy any particular legal status. The guidance had changed in 2019 and the current version gave no support for counsel's submission whereas the earlier version had done. The earlier guidance was “wholly unpersuasive”. TCGA 1992, s. 223 contained an express limitation to a permitted area, whereas FA 2003, s. 116 contained no such limitation, so Parliament could not be taken to have legislated in FA 2003 (which received Royal Assent in July 2003) against the background of SP 1/03, which had been published in April 2003.
The appeals would therefore be dismissed.
One has to read the legislation as it is. This author might venture to say that to try to read words into it purely by reference to a previous provision in respect of a particular relief now repealed was always likely to prove unsuccessful.
The point that HMRC guidance does not have the force of law is hardly startling, but it is interesting to note that the UT, having been asked for its comments, gave its “blessing” to Manual para. (which states that there is no statutory concept in FA 2003, s. 116 of “reasonable enjoyment”) and to para. , which states that in deciding whether land forms part of the garden or grounds of a building, there is a wide range of factors to be considered, none of which is likely to be decisive by itself.
Mr Patrick Cannon, counsel, instructed by Cornerstone Tax, appeared for the appellants
Mr James Henderson and Ms Calypso Blaj, counsel, instructed by the General Counsel and Solicitor to HM Revenue & Customs, appeared for the respondents
[1] This decision relates to three separate appeals which raise the same point of law as to the meaning and effect of section 116 of the Finance Act 2003 (“FA 2003”). Section 116 of FA 2003 contains a definition of “residential property” for the purposes of Part 4 of FA 2003, which deals with Stamp Duty Land Tax (“SDLT”).
[2] Each of the three cases concerns the sale of a house together with an area of land. The issue in each case was whether all of the land sold together with the house “[was] or form[ed] part of the garden or grounds of” the house. The rate of SDLT payable on the total consideration for each sale depended on the answer to that question. It was in the interest of the taxpayers, the purchasers in each case, to contend that some of the land sold together with the house was not, and did not form part of, the garden or grounds of the house. That question was determined by the First-tier Tribunal (“the FTT”) in each case adverse to the taxpayers. The taxpayers now appeal with the permission of the Upper Tribunal. The permitted ground of appeal in each case raises essentially one issue as to the interpretation of section 116 of FA 2003. The taxpayers contend that land can only be part of “the garden or grounds of” the house if the land is “needed for the reasonable enjoyment of the [house] having regard to the size and nature of the [house]”.
[3] If this contention on the part of the taxpayers were correct, then some or all of these cases will need to be remitted to the FTT to evaluate the facts of the cases by reference to this requirement. HMRC say that all three of the cases will need to be remitted if the taxpayers' contention is accepted. The taxpayers say that two of the cases would need to be remitted but in the third case, where the appellant is Pensfold, it is said that the case need not be remitted and, instead, the Upper Tribunal ought to decide the case in favour of the appellant.
[4] Conversely, the taxpayers accept that if their contention as to the meaning of section 116 of FA 2003 is not accepted, then that is the end of their appeals to the Upper Tribunal. There is no separate challenge as to the way in which the FTT applied its interpretation of section 116 to its findings of fact in each case.
[5] Although our decision on these appeals does not turn on the detailed facts of the three cases, we will briefly refer to the facts as found by the FTT to illustrate the point of law which has been argued.
[6] The appeal by Mr and Mrs Hyman relates to a property known as “The Farmhouse”, near St Albans. The property comprised a house and 3.5 acres of land. Mr and Mrs Hyman bought the property on 23 October 2015 for £1,515,000 and paid SDLT of £95,550. This was the correct amount of SDLT if all of the property was residential property within section 116 of FA 2003. About two years later, Mr and Mrs Hyman's advisers claimed a repayment of £34,950 which was said to have been overpaid as SDLT. HMRC did not agree to the repayment and that led to the appeal to the FTT which was decided in favour of HMRC. 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...
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