Myles-Till
| Jurisdiction | UK Non-devolved |
| Judgment Date | 11 March 2020 |
| Neutral Citation | [2020] UKFTT 127 (TC) |
| Date | 11 March 2020 |
| Court | First Tier Tribunal (Tax Chamber) |
[2020] UKFTT 127 (TC)
Judge Zachary Citron
Mr P Cannon of counsel appeared for the appellant
Mr P McDougall-Moore of HM Revenue and Customs' Solicitor's Office, appeared for the respondents
Stamp duty land tax – Different rates for residential and non-residential property – Grassy field adjoining countryside house and garden – Part of the grounds of the house? – Yes – Appeal dismissed.
Stamp duty land tax (SDLT) – Application of non-residential rates – FA 2003, s. 55(1B) – Whether subject-matter of transaction wholly residential or mixed-use – Whether grassy field adjoining house and garden part of grounds – FA 2003, s. 116(1) – Yes – Subject-matter wholly residential – Appeal dismissed.
The First-Tier Tribunal held that a grassy field adjoining a house and garden was part of the grounds and hence the appellant had been incorrect in applying the non-residential rates of SDLT to the purchase.
The appellant had purchased a country property (“Shepherd's Cottage”) comprising a house and garden, a detached garage and an adjoining grass-covered field, all in an area of approximately 1.25 ha. At some point, the appellant amended her land-transaction return to apply the lower Table B rates of SDLT, on the grounds that the adjoining field, known as “the paddock”, was agricultural land and hence that the subject-matter of the transaction was mixed-use. HMRC enquired into the amendment and rejected it. Following a review upholding HMRC's decision, the appeal came before the Tribunal.
The paddock comprised about a third of the total curtilage, was laid to grass, and enclosed by hedging and post-and-rail fencing. It had historically been part of the neighbouring farm, but by the time of the transaction it had come under common ownership with Shepherd's Cottage. There was no grazing or other agricultural use at the time of the transaction.
In the view of the Tribunal, the issue was whether sufficient evidence had been adduced to prove that at the effective date of the transaction the paddock had a self-standing function (in use for a commercial purpose) as opposed to being a functional appendage of Shepherd's Cottage.
Two recent decisions of the FTT were of persuasive authority – Hyman [2019] TC 07271 and Goodfellow [2020] TC 07507.
Actual use at the relevant time was critical and there was no evidence of the paddock's use for pasture on a commercial basis at that time. Nor was the paddock so extensive relative to the dwelling that it could not thereby be considered to form part of the grounds of that dwelling. The estate agent's particulars had also indicated no function or use of the paddock apart from enhancing the view from the house and garden.
On the balance of probabilities, there was insufficient evidence to prove that the paddock was not part of the grounds of Shepherd's Cottage at the time of the transaction. The appeal would therefore be dismissed.
The absence of any evidence of actual use for a commercial purpose at the time of the transaction proved fatal to the appellant's claim of mixed-use. The Tribunal judge also considered that paragraphs of HMRC's Stamp Duty Land Tax Manual to be helpful on the question of what constituted “grounds” of a dwelling. Hyman is also proving to be the benchmark for this type of case, and CGT cases are being dismissed as unhelpful.
[1] This case concerned whether a grass-covered field acquired with, and adjoining, a house and garden in the countryside was part of the house's “grounds” for the purposes of stamp duty land tax (“SDLT”).
[2] The appellant was not present at the hearing. Her counsel, Mr Cannon, explained that this was because she was in hospital; and that she was content for the hearing to proceed in her absence. Given this, and the facts that she was given notice of the hearing and had legal representation, I decided that it was in the interests of justice to proceed with the hearing in her absence.
[3] On 30 May 2018 HMRC wrote to the appellant saying that they wanted to check her amendment to her SDLT return for the acquisition of a property known as Shepherd's Cottage, near Henley in Oxfordshire (the “property”), on 23 January 2017.
[4] On 5 July 2018 HMRC wrote to the appellant saying that they had completed their check, that the letter was a closure notice under paragraph 23 Schedule 10 Finance Act 2003, that they considered that the “paddock” to the rear of the property was (like the rest of the property) “residential property”, and that they had amended her SDLT return to reflect this. The letter stated that the amount now due was SDLT of £20,875 and interest (to 16 July 2018) of £832.85.
[5] The appellant's representatives wrote to HMRC on 27 July 2018 stating that the letter was an appeal under paragraph 35(1)(b) Schedule 10 Finance Act 2003.
[6] The appellant's requested a statutory review of HMRC's decision; this was given by HMRC on 19 October 2018, upholding their original decision.
[7] On 14 November 2018 the appellant's representatives notified the appeal to the Tribunal.
[8] I had documents and an authorities bundles from each of the parties, in similar form. As well as correspondence between the parties, the documents bundle included estate agent particulars for the property from around the time of the sale to the appellant.
[9] I also had a witness statement and report from Mr Tom Warren, an agricultural and rural planning consultant. This evidence was first sent to HMRC and the Tribunal on 9 September 2019, over three months after the date set by the Tribunal in directions for exchange of witness statements. HMRC did not notify the Tribunal of their objection to admitting this evidence until 20 December 2019. Having heard submissions of the parties (and in particular Mr McDougall-Moore's acknowledgement that HMRC would not be prejudiced by admitting this evidence, as they had had several months to consider it), and balancing the importance of compliance with the Tribunal's directions with the overriding objective of dealing with cases fairly and justly, I decided to admit the evidence as to fact, but to exclude the opinion evidence (since the lateness of the application and admission meant that the Tribunal's procedures had not been followed to ensure fair and just treatment of expert evidence).
[10] Mr Warren gave oral evidence and was cross examined by Mr McDougall-Moore. Mr Warren's evidence was chiefly an “agricultural/mixed use statement” produced following his visit to the property on 30 August 2019.
[11] The appellant acquired the property on 23 January 2017 for £1,332,500. Its total area was about three acres and comprised:
- A three bedroom house
- A detached double garage
- A garden to the rear of the house
- A grass-covered field known as the paddock
[12] The property had three land registration numbers and was described in Form TR1 as follows:
- Shepherds Cottage Greys Green Rotherfield Greys Henley-on-Thames RG9 4QL
- land adjoining the east side of Shepherds Cottage Greys Green Rotherfield Greys Henley-on-Thames RG9 4QL
- land adjoining Shepherds Cottage Greys Green Rotherfield Greys Henley-on-Thames RG9 4QG
[13] The paddock was mentioned a few times in the estate agent particulars thus:
- The main sub-heading: IDYLLIC HOME WITH RURAL VIEWS AND A PADDOCK.
- As part of a description of the house: The master garden overlooks the garden and paddock beyond …
- Under the heading Outside:The property is approached via a gravel driveway providing off street parking for several vehicles and leads to a detached double garage. The rear, south facing garden is a particular feature of Shepherds Cottage and has a number of flower beds, stocked with a variety of plants and shrubs. The remainder of the garden is laid to lawn with a paved patio area and a pond.The garden looks back on to a paddock enclosed by mature hedging and post and rail fencing. The total plot measures just over 3 acres.
[14] The paddock was a grass-covered field of about 1.1 acres, situated behind the rear garden, enclosed by hedging and post and rail fencing. In 1983, the paddock formed part of a neighbouring farm. For many years, up to and including January 2017, the paddock had been covered in grass and therefore potentially usable for pasture i.e. grazing animals. This potential use of the paddock for pasture/grazing caused Mr Warren to describe it in his report as “agricultural land”.
[15] Mr Warren performed a “desk review” of properties within a 25 mile radius of the property and identified eight properties of the same size or larger, none of which included “agricultural land”.
[16] SDLT law is largely set out in Finance Act 2003 (and references to sections in what follows are to sections of that Act). SDLT is a tax...
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