HMRC has lost its appeal against a £225,000 Stamp Duty Land Tax (SDLT) claim. A first tier tribunal (FTT) heard the case which centred around Durford House, a 6 bedroom property set amongst 16.6 acres of land and 12 acres of mature woodland.
The claim was made by Cornerstone Tax, who claimed the property was eligible for mixed-use concession on the basis the woodland formed part of the garden and grounds of the dwelling house, saving the client £225,000. HMRC objected and the case was won on appeal. The evidence presented included
- The general public walked through the woodland, it had become a favoured spot for the local community.
- Access to the woods was open, there were no walls or fencing.
- There were also public footpaths established by right over a period of time, although the public freely used the woodland and was not restricted to the footpaths, they could be clearly heard in the private garden.
- Along with other residents, Cornerstone’s client was also liable to make payments to maintain the woodland and abide by the decisions of the management company.
The FTT concluded that the woods did not form a positive function to the dwelling house and, therefore, decided in favour of the appellants
Separately, another FTT sided with the home owner on a dispute over whether part of an 11-bedroom property was dedicated to commercial use.
Sortridge Manor, a £1.8m property in Devon, was transacted in 2021 with the owner Anne-Marie Hurst paying the non-residential SDLT rate on completion. In August 2022 HMRC issued a closure notice for underpaid SDLT of £47.750, saying the residential rate was due on the property.
After opening an enquiry, HMRC challenged the owner’s claims that part of the property was being let our for self-catering and holiday accommodation, and that a meadow in the property was being used under a commercial lease.
Ms Hurst was able to produce evidence she had formalised the relationship with the farmer, who had been using the meadow for around 8 years, charging him £500 a year as a tenant to graze his sheep and produce hay. She also told the tribunal it had been her intention to use the property for holiday lets and had negotiated her mortgage on the basis approximately 30% of the manor house would offer self-catering accommodation.
HMRC suggested the small number of bookings and limited number of online reviews meant the business was ‘(not a) commercial endeavour, generating insufficient turnover to properly represent commercial use of the property’.
Despite the ruling finding in favour of Ms Hurts, the tribunal suggested the decision was ‘marginal.’ Tribunal Judge Amanda Brown KC said the ‘critical question’ was whether ‘the scale of the activities associated with the provision of accommodation to paying guests enough to have reached the threshold necessary to represent commercial use with sufficient permanence and continuity to qualify as having used the property as an HISE and not simply as a dwelling?’
Summing up
‘the property was used as an establishment similar to a hotel or inn meeting the description in section 116(3)(f) such that no account is to be taken of its suitability for use as a dwelling with the consequence that the property is not residential property’.
The appeal was allowed and no further SDLT was due.
