Taxpayer claims rare SDLT victory in mixed residential-commercial use case
An individual taxpayer has recently defeated a claim by HMRC for additional Stamp Duty Land Tax (SDLT) in the sum of £98,000 (Withers v Revenue and Customs Commissioners ).
The taxpayer paid SDLT based on the non-residential rates which HMRC argued was incorrect. HMRC said that the whole property was residential for SDLT purposes.
The taxpayer acquired a dwelling which included a garden and grounds of approximately 39 acres. Some of the grounds were used for grazing and some of it was woodland which had been developed by the Woodland Trust as part of a rewilding scheme. The grazing land was subject to a formal grazing licence with a local farmer but sums payable under it were less than a full commercial rate. The farmer did however provide ongoing maintenance of the grazing land which included maintaining fencing and hedges which was of benefit to the taxpayer. The woodland was subject to strict written conditions governing the taxpayer’s use of it which included obligations on the taxpayer to control pests and not to graze livestock in it. The taxpayer paid towards the cost of maintenance of the woodland as did the Woodland Trust.
The First-tier Tax Tribunal (FTT) decided that the grazing land and the woodland each had separate self-standing functions from the main dwelling and its garden. The function of the grazing land was commercial and the function of the woodland was improving the environment and rewilding. Neither of these functions were residential uses. Consequently, the FTT concluded that the property was, for SDLT purposes, both residential property (being the dwelling and its garden) and non-residential property (being the grazing land and the woodland) and therefore, as a mixed use property, SDLT was payable based on the lower non-residential rates.
Although this case does not create a binding precedent being only a FTT decision, it has ended a run of HMRC victories in mixed use cases. HMRC will however continue to challenge such cases given the SDLT often at stake in them and the spurious nature of many claims. A detailed analysis of all of the relevant facts and case law is recommended where the position is not clear if taxpayers want to establish the commerciality of land acquired with dwellings.