Stamp Duty Land Tax: Mixed-use claims

It’s quite common for those purchasing a residential property with accompanying land to assume the acquisition is mixed-use and therefore subject to the lower commercial property rates of Stamp Duty Land Tax (SDLT). However, as demonstrated by several recent tax cases on this point, it isn’t always this straightforward.

The most recent case involved three appellants – (1) Mr and Mrs Hyman, (2) Pensfold and (3) Dr and Mrs Goodfellow – who all appealed to the Upper-Tier Tribunal (UTT) on the same point, namely the definition of ‘residential property’ in the SDLT legislation.

The appellants contended that land can only be part of the ‘garden or grounds’ if it’s required ‘for the reasonable enjoyment of the house having regard to the size and nature of the house.’

The key point was whether ‘reasonable enjoyment’ was included in the definition of ‘garden and grounds’ for SDLT purposes, as we know it to be for Capital Gains Tax.

The UTT found in favour of HMRC and agreed that the definition of ‘garden or grounds’ for SDLT is simply that the land is available to the owners to use as they wish. The absence of any commercial return received by any of the owners for the land demonstrated that the land was available for them to use and so their claims for mixed-use SDLT rates were rejected.

Based on the decision in this case, the following should be considered to support a mixed-use claim:

What does the marketing brochure say? Does it specify there are currently grazing rights?

• At the point of acquisition, is the land let on commercial terms, i.e. as opposed to at a peppercorn rent?
• At the point of acquisition, is there written evidence of any ongoing arrangements in place, such as contracts or agreements?

If you’re in the process of making a purchase, or indeed have done so recently, and you’re unsure if you could have made a claim for mixed-use, please get in touch with us to see if we can help.