Land Tax Dispute Costs the Owners £603k

In an intriguing tale that unravels like a saga, a couple’s purchase of a grand Georgian country house has sparked a heated debate over tax liabilities. The couple found themselves embroiled in a legal battle with HM Revenue & Customs (HMRC) over the Stamp Duty Land Tax (SDLT) that they owed on their £4.6 million property acquisition.

What Counts as a Residential Property?

The couple purchased a lavish Georgian house worth £4.6 million that comprises equestrian facilities, a cottage, a staff flat, and more. The massive mansion is set on 40 acres of land that HMRC claims to be liable for the higher rate Stamp Duty Land Tax (SDLT). According to the couple, 24 acres of the property were fields, which are not part of the dwelling grounds under Section 116(1)(b) of the Finance Act 2003.

HMRC's position was based on the fact that the property and its surrounding land were held under a single registered title and conveyed to the couple as such. Following an enquiry, HMRC issued a closure notice on 24 January 2020, which stated that the couple was liable for £603,750. However, the couple contested this claim, arguing that their actual tax liability only amounted to £219,500.

The Tribunal’s Decision

The dispute between the couple and the HMRC that concerned the transaction involving the farmhouse reached the First Tier Tribunal (FTT). During the tribunal, the couple argued that the fields surrounding the farmhouse were excessive for residential use and served no function related to the dwelling. Their barrister emphasised that according to the relevant tax legislation, the grounds of a dwelling should support its use as a residence, which the fields did not.

However, the tribunal ruled against the couple, finding that the fields provided amenities and benefits to the farmhouse. These included options for keeping other domestic animals and opportunities for leisure activities such as horse riding. The tribunal concluded that the fields, despite being primarily used for grazing horses, contributed to the overall amenity of the farmhouse. As a result, they were subject to a higher SDLT rate.

Ultimately, the tribunal dismissed the couple's appeal and affirmed HMRC's assessment of SDLT payable on the transaction.

Conclusion

The recently concluded tribunal between a couple and HMRC has resulted in the couple losing their battle against the higher-rate Stamp Duty Land Tax (SDLT) for their luxurious Georgian property spanning 40 acres. The tribunal ruled in favour of the HMRC, stating that the claim made by the couple was found to be insufficient.