Withers
| Jurisdiction | UK Non-devolved |
| Judgment Date | 25 November 2022 |
| Neutral Citation | [2022] UKFTT 433 (TC) |
| Court | First Tier Tribunal (Tax Chamber) |
[2022] UKFTT 433 (TC)
Judge Ruhven Gemmell WS
First-tier Tribunal (Tax Chamber)
Stamp duty land tax (SDLT) – Definition of garden or grounds – Whether property purchased was wholly residential – No– Finance Act 2003 (FA 2003), s. 116(1) – Appeal allowed.
In Withers [2022] TC 08649, the First-tier Tribunal allowed the taxpayer’s appeal in finding that part of the land purchased with a dwelling was used for a separate commercial purpose and was thus not part of the garden or grounds, thereby allowing the taxpayer to apply the lower, non-residential, rates of SDLT.
The facts
The appellant (referred to throughout as ‘GW’) had purchased a property known as Lane Farm. It comprised a dwelling-house (a barn conversion), an independent annexe and approximately 16 ha (39 acres) of gardens, fields and woodlands.
The historic grounds of the dwelling included land to the south, about 5 ha (12 acres) in area. The remaining land (all to the north) had been purchased by the previous owner over the course of 13 years and consisted entirely of agricultural land, which had remained in agricultural use, and about 3.5 ha of land under the care of the Woodland Trust. The agricultural land was let to a local farmer as grazing land for sheep at a peppercorn rent.
GW had claimed multiple-dwellings relief, which HMRC accepted was due, and applied the lower, non-residential rates of SDLT, claiming that the land to the north was not part of the garden or grounds of the dwelling and was in commercial use, and hence that the land was mixed use.
HMRC did not accept the mixed-use claim and corrected GW’s return accordingly.
The Tribunal’s decision
Judge Citron in Myles-Till had said that for land to be grounds, it had functionally to serve as an appendage to the dwelling rather than having a self-standing function. In the Tribunal’s view, the grazing land had been and was being used for a self-standing function, to wit a commercial purpose as grazing land.
The Tribunal accepted GW’s submission that the grazing land and the Woodland Trust land could be accessed and operated independently from the house and that the grazing was a business carried on by the local farmer. The 8 ha (20 acres) of grazing land to the north of the property was a distinct are where sheep were managed by farmers without any disturbance or disruption to the day-to-day life of Lake Farm.
As for the woodland, GW was required to allow unfettered access to the Trust’s workers, agents etc and was specifically prohibited from carrying out any activities that would lead to loss or damage to the trees and other species.
After taking into account the full range of factors (as required by the decision of the Upper Tribunal in Hyman & Ors v R & C Commrs), the Tribunal was satisfied that the land surrounding Lake Farm to the extent occupied for grazing or by the Woodland Trust did not constitute the garden or grounds of the main house and should not therefore be treated as residential property. The appeal would be allowed.
A rare example of a successful claim for mixed use by a taxpayer with an extensive holding of land around the main dwelling-house. In fact, the first defeat for HMRC in recent years in this area.
Probably what weighed the scales in the taxpayer’s favour were the following factors:
- The house was not a country mansion, so the 5 ha the taxpayer conceded were part of the garden or grounds were considered more than sufficient for a house of its size;
- There had been consistent and long-term use of the agricultural land as grazing on a commercial use. The farmer grazing sheep there had installed water tanks, a feeding station and stock fencing and ran a commercial farming operation. The fact that the rent was minimal was offset by other factors, such as the taxpayer’s being relieved of the need for capital expenditure on hedge cutting, fence repair and so on;
- The woodland was also under a standard Woodland Trust management scheme, which imposed obligations and restrictions on the taxpayer;
- The grazing land and the woodland had been acquired separately and piecemeal and had historically not formed part of the property attached to Lake Farm.
Note the contrast with the decision of the FTT in The How Development 1 Ltd, where the taxpayer lost a claim to mixed-use in respect of an area of woodland to which it was difficult to gain access from the dwelling house. There, however, the size of the entire estate was only 7.1 ha and the woodland extended to 0.8 ha only. More significantly, there was no evidence of any exploitation of the woodland for a commercial purpose.
It is a truism that every case turns on its own facts, but taxpayers in analogous circumstances may take heart. It remains to be seen whether HMRC will appeal.
Comment by Zigurds G Kronbergs, Senior Tax Writer, Croner-i Ltd.
The appellant represented himself
Caitlin McDonald, Litigator of HM Revenue and Customs' Solicitor's Office appeared for the respondents
[1] The form of the hearing was by video, all parties attended remotely and the remote platform used was the Tribunal video hearing system. The documents which were referred to comprised of a Hearing Bundle of 344 pages, skeleton arguments for both parties and a series of photographs.
[2] Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.
[3] The Appellant, Gary Withers (“GW”), appealed against a closure notice issued by the Respondents (“HMRC”). The closure notice increased the Stamp Duty Land Tax (“SDLT”) due from £114,500 (the amount self-assessed by GW) to £212,500, an increase of £98,000.
[4] The closure notice was issued to GW pursuant to an enquiry into his SDLT return for the acquisition on 31 July 2019 of certain buildings and land located at the property known as Lake Farm, in Kent (“the Property”).
[5] HMRC allowed GW's claim for Multiple Dwellings Relief (“MDR”) but concluded that the acquisition was of “wholly residential property” and calculated the increased amount of SDLT in accordance with “Table A” of section 55 of the Finance Act 2003, as amended by paragraph 1, Schedule 4ZA 2003 for Higher Rates for Additional Dwellings (“HRAD”)
[6] GW contends that the Property includes non-residential property and, therefore, it should be classed as mixed-use. HMRC contends that the Property is wholly residential and that the residential SDLT rates apply.
[7] The Property consists of a dwelling-house (“the dwelling”) and an independent annexe (“the annexe”), surrounded by approximately 39 acres of gardens, fields, and woodlands.
[8] On 28 May 2019, an agreement was signed by Mr John Foley, the previous owner, and Messrs. H G Tompsett & Sons Ltd (“the Grazer”), allowing the Grazer to occupy approximately 20 acres of land forming part of the Property for grazing sheep, and approximately a further 5 acres of land for cutting hay, for a period of one year, in return for consideration of £800 per annum.
[9] The property called “Lake Farm” was a barn conversion and had never been a farm. It had been part of an estate called Great Maytham Hall. It was previously called Lake Barn and the annexe was called Meadow Barn; the names had been changed by a previous owner.
[10] Lake Farm was advertised as sitting in landscaped gardens. The fields and woodlands were mentioned separately. The land where the fields were was hidden from the house. The public rooms of the dwelling faced south and the extended view was over land not belonging to Lake Farm.
[11] The historic grounds of the dwelling were the driveway, extending to approximately 500m, the land around the dwelling and the land to the south extending to 10–12 acres. The remaining acres to the north of the dwelling were separated by stock proof fencing and had been acquired in 3 transactions in 1994, 2004 and 2007. It was all agricultural land when purchased and had remained in agricultural usage ever since. This land had never been used for residential purposes.
[12] Approximately 8.5 acres of woodland had been developed by the Woodland Trust in 2009. At the northern boundary there was a public footway. The northern boundary marked the farthest point from the dwelling.
[13] On 31 July 2019, GW and his wife completed the transaction purchasing the Property for consideration of £2,500,000.
[14] On the same date, HMRC received an SDLT return from GW. The Property was classified using the code “02” meaning “mixed-use”, and the amount of tax self-assessed was £114,500.
[15] On 13 February 2020, HMRC wrote to GW and his agent Cripps Pemberton Greenish (“the Agent”), stating that a check was being conducted into the return under paragraph 12, Schedule 10 FA 2003. Information and documentary evidence were then requested to support the check.
[16] On 4 March 2020, the Agent responded to HMRC stating that the Property was purchased subject to an existing grazing agreement dated 28 May 2019 and that, at the time of completion, GW owned another farm, May Farm, Chicks Lane, Kilndown, Kent and a flat in London. The Agent enclosed documents including a copy of the contract dated 27 June 2019 in relation to the acquisition of the Property; the grazing agreement dated 28 May 2019; replies to agricultural enquiries; and a transfer of registered titles with HM Land Registry.
[17] On 16 September 2020, HMRC wrote to the Agent requesting further information regarding the Property being classified as “mixed-use” on the SDLT return and regarding the MDR claim.
[18] On 13 and 14 October 2020, the Agent responded stating that, in respect of the “mixed-use” query, the Grazer had been grazing land at the Property since 2001 on an informal basis until 2006, with a formal agreement...
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