A discussion of a First Tier Tribunal case seeking a refund of stamp duty land tax (SDLT); Hyman v HMRC (2019).
The Facts
Mr and Mrs Hyman purchased a property as wholly residential described as “The Farmhouse” for £1,515,000 in October 2015. The property was accompanied by 3.5 acres of land and a barn. On the date of purchase, they submitted an SDLT return with stamp duty payable of £95,550 which was correct if the property was treated wholly as residential.
The estate agent described the property as “A superb country retreat with historic barn set in over 3.5 acres………..it is rare to find as lovely a country home as this in such an attractive yet convenient setting. Surrounded by its own stunning gardens which extend to over 3.5 acres…”.
The agent representing Mr & Mrs Hyman wrote to HMRC in 2017 making a claim for repayment of £34,950 in overpaid SDLT. The agent argued the property should have been classified as mixed-use rather than residential as the property contained non-residential elements.
Mr Hyman used the barn to store larger items of equipment; tractor, mower, strimmer and various power tools and used these to maintain the garden and meadow, he described them as being “for agricultural use”. The previous owner had stored similar items in the barn.
The meadow was used for walking the family dog and keeping a few chickens to produce eggs for their own consumption. Mr Hyman asserted this was agricultural activity. A public bridleway formed part of the property and this was used by 10-50 people per day either cycling, jogging or horse-riding.
The Law
Great attention was given to the meaning of “residential property” per Section 116 of Finance Act 2003:
(1) In this part “residential” property means – (a) a building that is used or suitable for use as a dwelling or is in the process of being constructed or adapted for such use or (b) land that is or forms part of the garden or grounds of a building within paragraph (a) (including any building or structure on such land). Or (c) an interest in or right over land that subsists for the benefit of a building within paragraph (a) or land within paragraph (b).
The Appeal
Mr and Mrs Hyman argued that the meadow, bridleway and barn are not “interests in or rights over land that subsist for the benefit of a dwelling” and therefore do not fall within the definition of “residential property” or “garden or grounds”. In addition, the barn was non-residential and would need planning permission to be converted to residential.
HMRC responded by saying that “grounds” are the land surrounding the house which are available as an amenity for the dwelling and the use (non-use) is not relevant. Although the barn is non-residential it still falls within 116(1)(b) “as a building or structure on such land”.
The discussion turned to dictionary definitions of “garden” and “grounds”. It was stated that generally speaking any land surrounding a residence which is under the same ownership should be treated as the grounds of the residence unless used for some other purpose. Land used for another purpose at the date of disposal such as agricultural land, commercial woodlands, land under development or land in use for a trade of a business should not be regarded as part of the garden or grounds.
The following land should not be excluded from gardens or grounds:
- Paddocks or orchards where there is no significant business use.
- Land which has traditionally been part of the garden but at the date of sale is overgrown and unused.
- Land which has a building on it, unless that building is in use for a business or let.
- Land purchased on a different date to the residence and brought into use as part of the garden and grounds at the date of disposal.
The Decision
The judge concluded that the property was not mixed-use but wholly residential. The SDLT paid was due and therefore no refund is given.
My comments:
The decision was as I expected, from the facts it was clear from the outset there was only personal use of the land and barn. A few chickens were never going to satisfy agricultural/ farming activity. The current and previous use of the land is key to building a case for mixed-use.
Yet another stamp duty land tax case that highlights the importance of estate agent property descriptions, I believe all agents should carefully consider the tax implications prior to drafting the particulars. I made a similar comment about the PN Bewley Ltd v HMRC case.
Please note at the time of writing, the case is still within the appeal period and Mr and Mrs Hyman could appeal against this decision.
If you would like to read the full case it can be found here