SDLT – whether residential – definition of grounds – Withers v HMRC

“The Tribunal does not accept HMRC’s submission that the land surrounding the dwelling is suitable for leisure use where there is no commercial farming, building or other commercial use on the land; nor accepts that the separate purpose has to be necessarily for commercial use although the latter is a good example of such use.

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HMRC’s manual, SDLT 00470-extent of land and geographic factors states that the extent/size of land in question will also be relevant in relation to a building and that the test is not simply whether the land comprises garden or grounds but whether it comprises the gardens or grounds of the dwelling.

The Tribunal considered that Lake Farm is not a farm but a barn conversion (where the first-floor bedrooms are built into the eaves) and is not a large manor house. GW accepts that 12 acres of gardens and grounds are more than adequate for the property. Within those 12 acres there is a large lake, stables and paddocks, a orchard and a substantial garden.

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The Tribunal considered that the extent of land the grazing land and Woodland Trust land do not form part of the garden or grounds of the dwelling.

The Tribunal make this finding whilst accepting that the fencing and gates do not create any differentiation between residential and non-residential property and that there is no acreage limit on the land that can be classified as residential property for SDLT purposes.

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As was established in evidence, not all the ‘panoramic views’ are over land belonging to GW, and it is perhaps somewhat hyperbolic to say that the dwelling is surrounded by its own rolling pasture and an indigenous woodland. Whereas this is true as a matter-of-fact this does not in itself support the view that the areas of land are in the grounds “of” a building whose defining characteristic is it ‘use’ as a dwelling.

The Tribunal again adopts the approach of Judge Citron in Myles-Till that the words ‘of’ and ‘use’ indicate that the use or function of adjoining land itself must support the use of the building concerned as a dwelling. The grazing land and Woodland Trust land do not provide that support.

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The Tribunal accepted that the farm, has domestic outbuildings, an orchard, stables and a paddock within 12 acres and that separately there are 20 acres of grazing land with feeding and water troughs in the land and internal fencing which are consistent with the commercial grazing of sheep and the Woodland Trust land.

The Tribunal accepted GW’s submission that the grazing land to the north of the property comprising approximately 20 acres is a distinct area of property where sheep are managed by farmers without any disturbance or disruption to the day-to-day life of Lake Farm.

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The Tribunal, in following a balanced assessment of all the facts, considers that the land surrounding Lake Farm to the extent that it is occupied for grazing and by the Woodland Trust does not constitute garden or grounds as defined in section 116 of the Finance Act 2003 and, therefore, should not be treated as residential property for the purposes of SDLT.

There were, importantly, grazing and Woodland Trust agreements in place at the time purchase and the Tribunal consider that the relevant areas of land were used for a separate purposes and self standing functions and failed to meet the tests as residential property. Their use or function does not support the use of the dwelling/building concerned as a dwelling.”