The purchasers of a Georgian country house with extensive grounds have been ordered to pay £603,750 in higher rate stamp duty on the transaction as the property is deemed purely residential.
Simon and Joanne Holding went to the First Tier Tribunal (FTT) to dispute a tax demand from HMRC for stamp duty land tax (SDLT), arguing that the grounds of their property should be liable for non-residential SDLT.
The dispute related to the purchase of a £4.6m five-bedroom Georgian country house with a cottage, staff flat and extensive equestrian facilities, set in 40 acres of land. Some of the land was made up of seven railed horse paddocks and there was a separate building housing an indoor floodlit horse arena.
Approximately 24 acres of the property was fields, which the appellants argued were not part of the grounds of the dwelling under section 116(1)(b) of Finance Act 2003.
As this was the Holding’s second property at the time of purchase in August 2018, the higher rate of SDLT was payable.
Following an enquiry into the appellants’ SDLT return, HMRC issued a closure notice dated 24 January 2020 which amended the return to show £603,750 tax was due.
The Holdings disputed this calculation, claiming that they only owed £219,500 on the transaction.
HMRC’s case was that the fields form part of the grounds of the dwelling and the property is therefore entirely residential property and the higher rate of tax is payable.
Loretta McLaughlin, HMRC’s in-house litigator relied on the fact that the property including the fields was held by the vendors under one registered title and that title was conveyed to the appellants. She argued that this was ‘a strong indicator that the fields were part of the grounds of the farmhouse’.
At the tribunal, the appellant, Simon Holding said that the land surrounding the house was ‘substantially in excess of what he considered a reasonable person would deem appropriate for the use of the farmhouse as a dwelling’, and that ‘the fields were not part of the grounds of the dwelling’.
The Holding’s barrister, Patrick Cannon of Excello Law, argued that the fields performed no function in relation to the farmhouse. He emphasised that s116(1)(b) refers to the garden or grounds “of” the dwelling, which indicates that the land must support the use of the dwelling as a dwelling and that the fields did not provide any amenity, benefit or other function in relation to the farmhouse as a dwelling.
However, the tribunal said that the fields were available for use by the vendors as winter grazing for their horses, in the same way that fields 8 – 10 were used by the appellant as winter grazing. Field 11 was available to the vendors for the same purpose. The fields were also available for riding horses.
The tribunal found that ‘the fact that the fields were fenced off from the rest of the property and indeed from each other carries little if any weight. The paddocks are also separately fenced off and the fencing of the fields does not make them inaccessible’.
Tribunal Judge Jonathan Cannan said: “There is no evidence as to how the vendors actually used the fields apart from their agreement with the agricultural contractor. In any event I consider that the availability for use is significant. The fields gave the vendors options for keeping other domestic animals, in the same way that the appellants kept a donkey and alpacas on field 12.
“Indeed, it is not unusual in country properties for an owner to keep farm animals such as sheep, without seeking any commercial benefit but just for the love of the animals. The fields provide those opportunities, albeit passively, and as such provide a benefit or amenity to the farmhouse.”
While Judge Cannan agreed that grounds must provide some amenity or benefit, or perform some function in relation to a dwelling, he did ‘not agree that the fields provided no such amenity, benefit or function in relation to the farmhouse’, and so dismissed the appeal.
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