What are “grounds” for the purposes of Stamp Duty Land Tax?

A recent case brought in front of the First Tier Tribunal (“Tribunal”) considered whether “grounds” as referred to in section 116(1)(b) of the Finance Act 2003, being the section that defines residential property for the purposes of the Stamp Duty Land Tax (“SDLT”) regime, has a wide meaning.

The facts of the case were that the purchasers had bought a property comprising a farmhouse, a barn, a public bridleway and 3.5 acres of land, comprising gardens and a meadow. The SDLT due was paid on the basis that the whole property, including the barn, the meadow and bridleway was a residential property. However, the purchasers later attempted to reclaim part of the SDLT that they had paid on the basis that the SDLT rates for mixed use applied to the transaction as the barn, meadow and bridleway were not used for residential purposes.

The tribunal decided that the grounds comprised land that formed part of or surrounded a house that was occupied for residential purposes and that they were available for use by the occupiers of the house. Even though the bridleway was used by the public and part of the grounds were separated by features such as fences and or hedges did not prevent the land from being classed as part of the grounds of the residential property.

However, if the grounds or part of them, such as the meadow or barn were used for a commercial purpose (say for grazing and/or use for agricultural purposes), then the land in question would not form part of the grounds of the residential property and the mixed use rates would have applied to the transaction.

When buying a residential property with grounds attached to it, particularly high value residential property, it is therefore important to consider the use of those grounds and not just if they are open to the public and/or separated by physical features such as fences and/or hedges, amongst all other relevant matters, when determining your SDLT liability. HMRC has recently released additional guidance as regards what constitutes gardens and grounds which is broadly in line with the Tribunal’s decision.

How we can help?

At Bromleys, we regularly work with our clients’ tax advisors to ensure that our clients consider their SDLT liabilities when purchasing property. If a client does not have a tax advisor, we have built good relationships with several tax advisors whom we can refer our clients to in order to ensure that our clients receive concise and timely advice in relation to taxation matters.

For assistance with the sale or purchase of property (whether residential, commercial or agricultural), or indeed any other property law matters, please contact Paul Westwell at pwestwell@bromleys.co.uk or Martin Blaylock at mblaylock@bromleys.co.uk or on 0161 330 6821. Alternatively, you are welcome to attend any of our free legal surgeries – no appointment necessary

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.