Whether a Paddock Forms Part of the “Grounds” of a Dwelling for SDLT Purposes

The case of Ferguson & Anor v Revenue and Customs [2026] UKFTT 238 (TC), decided by the First-tier Tribunal ("FTT") on 15 December 2025, concerns whether a paddock included within a property's registered title constituted part of the "grounds" of a dwelling within the meaning of Section 116(1)(b) of the Finance Act 2003 (the "Act").  The decision confirms that the existence of a grazing licence does not, of itself, alter the character of a paddock as residential grounds, and that the entire transaction was subject to residential rates of SDLT rather than the comparatively lower mixed-use rates.

The appellants purchased a property known as Marden Grange for £4,250,000. The property comprised approximately 4.3 acres, including an eight-bedroom house, gardens, swimming pool, tennis court, and a paddock of approximately 0.4 acres. The paddock had been used since 1989 by third parties operating a neighbouring livery business under a grazing licence. The appellants filed their SDLT return on a mixed-use basis. HMRC opened an enquiry and issued a closure notice concluding that the property was entirely residential, increasing the SDLT liability by £219,250.

The sole issue before the FTT was whether the paddock formed part of the grounds of the dwelling under Section 116(1)(b) of the Act.

The FTT dismissed the appeal, finding that the paddock was part of the grounds. The FTT applied the multi-factorial test approved by the Upper Tribunal in HMRC v Suterwalla [2024] UKUT 188 (TCC) and placed significant weight on several factors: the paddock was physically contiguous with the gardens and tennis court, separated only by a simple post and rail fence; it was accessible solely across the residential grounds; the grazing licence was a personal arrangement that did not bind the purchasers as successors in title; and grazing horses is the paradigm use of a paddock, consistent with residential character. The FTT endorsed the reasoning in Harjono v HMRC [2024] UKFTT 228 (TC), noting that inserting a commercial agreement over a paddock does not, of itself, alter its character as grounds of a dwelling.

Accordingly, the FTT held that the relevant land consisted entirely of residential property for the purposes of the Act, and HMRC's closure notice amendment was upheld.

Read the full decision of Anor v Revenue and Customs [2026] UKFTT 238 (TC) here