Have you paid too much stamp duty?

A recent case has highlighted the importance of obtaining clear advice on stamp duty land tax (SDLT) liability when buying property that extends beyond a standard house and garden. In the first tier tribunal case, Guerlain-Desai v HMRC [2024] UKFTT 515 (TC), a purchaser bought a house, triple garage, four acres of private gardens plus 12 acres of mature woodlands as part of a single transaction for £3,160,000. They submitted their tax return on the basis that the entirety of the property was residential and paid the stamp duty land tax on that basis. The purchaser’s agents then contacted HMRC in order to re-classify the property on the basis that it also contained non-residential property and submitted an amended tax return, requesting a refund of SDLT paid in the sum of £225,250. HMRC opened an enquiry into the tax return and then issued a closure notice to say the tax had been paid correctly. The purchaser appealed.

SDLT is the tax a purchaser of property pays when buying a property. The rates of tax differ between residential and non-residential property and so it is important to ensure that purchasers are clear about the status of a property when they submit their return.

Most purchases of homes will be simply residential. Purchases of a café or shop are obviously non-residential.  The distinction becomes more difficult when property comprises of a dwelling and other property that could be classed as non-residential, which was the position with the above case.

The Tribunal found that the woodland formed part of a larger area which was used by all of the woodland owners collectively, as well as there being substantial use by the general public. Fencing consisting of mature trees and bushes had been erected between the gardens of the property and the woodland in order to provide a privacy screen. There was therefore no view of the dwelling house from the woods and no view of the woods from the house. There was also a management company that had historically been set up for management of the woods, to which the purchaser had to make contributions for maintenance and abide by the management company decisions. The management company had a charge on the title to the property as security for the payments due to it.

During the tribunal case, HMRC argued that physical accessibility does not preclude the woods from forming part of garden and grounds of residential property. It can be passively integral to the grounds providing exclusivity, a rural character, privacy and security. The woods therefore formed part of the garden and grounds of the property.  HMRC also argued that the woodland was there for the additional benefit of the property and therefore should be classed as residential. HMRC confirmed that they had not visited the property. 

The tribunal decided that the woods did not form part of the gardens and grounds of the dwelling. The tribunal agreed that “there must be some link with the dwelling and the woods beyond the fact that they were purchased together in a single transaction and that the woods must have a functional purpose for a house of the size of the dwelling house”. The tribunal did not consider that the woods had a functional purpose for, or a use that supported, the dwelling in this case. The tribunal also considered that “the use of the woods by the public at large was considerable and the woods were not passively integral to the grounds of the dwelling house providing exclusivity, privacy and security.”

The tribunal found in favour of the purchaser, and agreed that the woodland was not residential property for the purposes of SDLT.

The above case shows how important it is to consider all factors when deciding what SDLT rate will apply. This is why conveyancers should always carefully consider a client’s position and refer them to a tax specialist where the position is not clear cut.

If you think you have paid too much in stamp duty, we will be able to help. Speak to one of our expert solicitors today.