A taxpayer has lost his case at the Upper Tribunal (UT) concerning whether a land transaction was in regard to residential or mixed-use land.  The Stamp Duty Land Tax (SDLT) rates for mixed use land are significantly lower than those for residential land and the difference between the two rates was just over £200k.  The taxpayer, a company, had purchased a large house with extensive gardens and grounds that included a woodland in Cambridgeshire.  This woodland, while not being exploited for commercial purposes was held by the taxpayer to be not part of the grounds and was not used for residential purposes.

Under the SDLT legislation residential property is defined to include ‘land that forms part of the garden or grounds’ of a residential building so where the woodlands were not considered part of the grounds then this part would be non-residential and the whole transaction would be mixed-use at the lower SDLT rates.

The taxpayer’s case had previously been heard by the First-tier Tribunal (FTT) who had dismissed the case finding that woodland formed part of the grounds.  The taxpayer had a few issues with the judgement of the FTT and appealed to the UT, including the fact that it took just under a year for the decision to be published.

The UT dismissed most of the grounds put forward by the taxpayer, finding that case law showed that deciding whether a parcel of land is grounds or not is an evaluative exercise that the fact-finding first instance tribunal must ascertain and that there were few material errors with the FTT’s decision.

However, the UT noted a few errors being:

• The FTT relied on an irrelevant factor in so far as it took into account the basis of the initial SDLT return in determining whether the woodland formed part of the grounds.
• The FTT acted in a procedurally unfair way by referring to and apparently relying on its own views as to the likely position in relation to planning consent and rateable valuation without giving the parties any opportunity to make submissions on those issues.
• In all the circumstances of this case, the FTT erred in failing to consider or mention the oral evidence given by a witness on behalf of the taxpayer.
• The FTT erred in not giving reasons for its conclusion that the woodland did not need to be accessible in order to be grounds for SDLT purposes.

In combination the first three errors, taken together, amounted to a material error and the UT set aside the FTT’s decision.  The UT then remade the decision, in HMRC’s favour, detailing how each of the points noted had impacted their decision.

The decision can be found at: The How Development 1 Ltd v The Commissioners for HM Revenue and Customs [2023] UKUT 00084 (TCC) – GOV.UK (www.gov.uk)

This case has helped clarify the approach to take when considering whether a parcel of land is part of the grounds of a residential building following on from a Court of Appeal decision that we reported on here.

Please let us know if you have any questions regarding stamp duty land tax, we can assist with ensuing generous reliefs are appropriately applied.  We can also advise when to make amendment to returns and how to negotiate with HMRC.