This case revolves around an appeal against HMRC’s decision to deny a claim for a refund of SDLT. The story unfolds with the joint purchase of Horton Hall in Staffordshire, a property with a rich history.
However, the heart of the dispute lies in the nature of the surrounding fields acquired with the property and whether they qualify as residential property for SDLT purposes.
Background
In the case of Mark White and Carol Kane (the appellants) against The Commissioners for His Majesty’s Revenue and Customs (HMRC), the appellants contested a decision by HMRC to deny their claim for a refund of Stamp Duty Land Tax (SDLT).
The appeal stemmed from the appellants’ joint purchase of Horton Hall in Staffordshire on 23 August 2013 for £1,300,000, which included five Land Registry titles and incurred an SDLT of £65,000.
The appellants later claimed a refund of £13,000 in SDLT on the basis that the acquisition should have been classified as mixed residential and non-residential property, resulting in a lower SDLT of £52,000.
HMRC paid the claimed amount but later declined the refund following an enquiry. This refusal led to the appellants appealing HMRC’s decision to the tribunal.
The main dispute centred on the nature of the fields surrounding Horton Hall, which were part of the property acquisition. The appellants argued that these fields were either not considered part of the grounds of Horton Hall or were in agricultural use, rendering them non-residential property.
Relevant Law
The calculation of Stamp Duty Land Tax (SDLT) is based on the effective date of the transaction, which was agreed upon as 23 August 2013. The law defined “residential property” and “non-residential property” under section 116 of the Finance Act 2003.
Residential property was defined as a building suitable for use as a dwelling, along with land forming part of the garden or grounds of such a building.
Non-residential property included all property not classified as residential. There was no dispute that the buildings and gardens purchased were residential, as per section 116(a).
The dispute revolved around whether the fields acquired in the same transaction qualified as part of the grounds of the residential property, as outlined in section 116(b).
Evidence
No witness evidence was provided by anyone involved in the property transaction or with knowledge of the property at the transaction date. Instead, the appellants presented evidence from Mr. Warren, an agricultural and rural planning consultant, and Mr. Cobley, the head of Ms. Kane’s family office.
Mr. Warren had no direct knowledge of the field’s use at the transaction date. His evidence was based on a site visit he conducted in 2019, photographs provided by the appellants, and discussions with the appellants and a staff member who was not present at the property during the transaction.
Mr. Warren stated that the fields were used by local farmers based on information from the appellants and historical satellite imagery showing agricultural use.
Mr. Cobley, the head of Ms. Kane’s family office, had no direct knowledge of the transaction but was informed by Ms. Kane, her driver, and groundsmen that there was a loose arrangement for local farmers to use the fields.
However, these individuals were engaged after the transaction date and had no direct knowledge of the property at that time.
Assessment of Whether the Fields Formed Part of the Grounds
The determination of whether the fields were part of the grounds for the residential property involved an analysis of various factors, including historic use, use at the transaction date, legal constraints, and geographical factors.
Historic Use
Mr. Warren’s evidence suggested historical agricultural use based on satellite imagery. However, there was no evidence regarding the extent or nature of this use.
Use at the Transaction Date
No direct evidence regarding the use of the fields at the transaction date was available. The appellants argued that the fields’ inherent quality was agricultural, making them unsuitable for residential use.
The tribunal disagreed, stating that agricultural use did not necessarily preclude land from being part of a building’s grounds.
Legal Constraints
The transaction documents did not reference agreements for field use at the transaction date. While informal arrangements with local farmers were mentioned, there was no evidence that these arrangements were in place at the transaction date or were binding on the appellants.
In contrast to another case (Withers), where agreements were in place at the time of purchase, the present case lacked such evidence.
Geographical Factors
Horton Hall, a historic building, was surrounded by land sold over generations. The fields largely encircled the property. While the appellants argued that some fields were relatively distant from the buildings, the maps showed two continuous areas bordering the buildings and a single rectangular field across a lane.
The tribunal concluded that the fields, as a whole, were closely connected to the property, with a lane separating only one side.
Whether the Property Was Otherwise Non-Residential
The appellants contended that public footpaths on the property indicated non-residential use. The tribunal referred to previous decisions (Hyman and Averdieck), stating that the existence of public footpaths did not render the property non-residential.
The footpaths did not imply a self-standing function or commercial use of the property.
Conclusion
The tribunal assessed various factors and concluded that, at the effective date of the transaction, the fields were functionally part of Horton Hall and qualified as appendages to the property.
They had no self-standing function at the transaction date. The tribunal emphasised that any subsequent informal arrangements with local farmers did not alter the property’s status at the time of the transaction.
The appeal was dismissed, affirming that the fields were residential property forming part of the grounds for SDLT purposes.
