What do an unmown meadow, a paddock and a gentleman’s agreement to use land adjacent to their house have in common?

All are insufficient to give an acquisition of a house a non-residential character for the purposes of stamp duty land tax (SDLT).

Context

SDLT is payable at a lower rate on the acquisition of property in England and Northern Ireland if it includes non-residential property. Land will be residential if it constitutes the “garden or grounds” of a residential building.

Over the last few years more than one taxpayer has argued that where very extensive land is included in the purchase of a house, that acquisition has a non-residential character and as such benefits from lower SDLT rates.

At first instance, taxpayers have argued that very extensive land goes beyond the natural meaning of the gardens or grounds of a house. At appeal, the taxpayers switched tactics and argued that any land must be necessary for the reasonable enjoyment of the property – and that extremely large swathes of land fall outside of such a requirement. In support of this argument, taxpayers relied on HMRC’s guidance on a similar concept in the capital gains tax regime.

Landing a blow

In Hyman and others v HMRC [2021] UKUT 0078 TCC the Upper Tribunal rejected the taxpayers’ arguments, finding that there is no wording in the SDLT legislation which imposes or even hints at a requirement that land is needed for the reasonable enjoyment of the dwelling.

Why does this matter?

The ever-widening gulf between the SDLT rates for residential purchases (the top rate will be 17% from next month) and non-residential ones (the top rate in England is 5%) makes finding a non-residential element to a purchase increasingly attractive. But this case is a reminder that the inclusion of significant tracts of land in a purchase will not on its own be sufficient to obtain non-residential treatment. Where some of that land is, for example, the subject of a commercial licence for use by a farmer, it may however qualify as non-residential and benefit from the lower rates.

In all contexts, the 14-day deadline for filing an SDLT return and paying the SDLT means that advice should be obtained before any relevant purchase.