Suterwalla & Anor. v The Commissioners for HMRC
[2023] UKFTT 450 (TC)
The Commissioners for HMRC v Taher Suterwalla & Anor
1 July 2024
[2024] UKUT 188 (TCC)
Upper Tribunal
HMRC argued that a paddock bought with a house should be taxed at a higher rate because it was part of the house's grounds. The tax court initially agreed with the homeowners that the paddock was separate because they leased it for grazing. A higher court agreed that the lease wasn't the main reason – other factors showed the paddock was separate from the house. So, the lower tax rate for the homeowners stood.
Key Facts
- •Mr and Mrs Suterwalla purchased a property including a seven-bedroom house, gardens, a paddock, and a grazing lease on the paddock granted on the day of completion.
- •HMRC challenged the SDLT return, arguing the property was wholly residential, not mixed-use as declared by the Suterwallas.
- •The FTT allowed the Suterwallas' appeal, finding the paddock was non-residential due to the grazing lease.
- •HMRC appealed to the UT on three grounds: the FTT erred in its application of Ladson Preston, in considering the grazing lease, and in its overall conclusion.
Legal Principles
Section 116(1)(b) of the Finance Act 2003 defines residential property to include land forming part of a building's garden or grounds. The connection between the land and the dwelling is key, but reasonable enjoyment is not required.
Hyman & Ors v HMRC [2021] UKUT 68 (TCC), Hyman CA, How Development
In determining whether land is part of a dwelling's grounds, various factors must be considered and weighed, including proximity, layout, historic and future use, access, and whether separate use exists. The existence of third-party rights over the land doesn't automatically preclude it from being considered grounds.
Hyman UT, Faiers, How Development, 39 Fitzjohns Avenue Ltd v HMRC
The effective date for SDLT purposes is the completion date of the transaction. The nature of the chargeable interest is determined at the time of completion.
Ladson Preston Ltd v HMRC [2022] UKUT 301 (TCC)
Outcomes
HMRC's appeal was dismissed.
The UT held that the FTT was entitled to find the paddock was not part of the house's grounds even disregarding the grazing lease, based on factors like separate title, distance from the house, limited access, lack of support for the dwelling, and non-integral nature. While the UT found the FTT erred in considering the post-completion grazing lease and in relying on the Suterwallas’ preference to exclude the paddock, these errors didn’t invalidate the overall conclusion.