Key updates to HMRC manuals
- The distinction between residential and non-residential property. SDLTM00360 – SDLTM00365A (Dated 1 October 2019)
- What constitutes a dwelling, and guidance on the terms ‘suitable for use’, ‘mixed use’ and ‘in the process of being constructed or adapted for use as a dwelling’. SDLTM00380 – SDLTM00400 (Dated 1 October 2019)
- Guidance on how to determine the number of dwellings forming part of a land transaction. SDLTM00410 – SDLTM00430 (Dated 1 October 2019). This will be of importance when determining if the transaction should be treated as non-residential by virtue of consisting of 6 or more dwellings. The new guidance will also inform considerations around Multiple Dwellings Relief and the application of the 3% higher rates involving multiple dwelling purchases.
- The meaning of garden or grounds for the definition of residential property. SDLTM00440 to SDLTM00480 (Dated 25 June 2019)
Hyman (TC7271)
Remaining on the question of ‘garden or grounds’, this month’s case study looks at the recent First Tier Tribunal case of Hyman (TC7271).
In the Hyman case, the taxpayer had paid the higher residential rate of SDLT on their property purchase, but subsequently claimed the property should have been classified as mixed-use and that SDLT was therefore due at the lower non-residential property rate (it should be noted that the highest rate of SDLT payable in respect of a residential property is 15%, compared to 5% for a commercial property). As well as a farmhouse, the property in question consisted of two gardens, a duck pond, barn, and a meadow with a public bridleway running through it. The property had been advertised by the estate agent as a residential property with grounds.
For SDLT purposes, property is determined as mixed-use where it does not consist entirely of residential property. Residential property includes ‘land that is or forms part of the garden or grounds of a residential building’.
The Tribunal found in favour of HMRC in this case, holding that 'grounds' has, and was intended to have, a wide meaning. The judge concluded that in its ordinary meaning, 'grounds' means land that is attached to or surrounding a house, which is occupied with the house, and is available to its owners to use. However, that land would not be grounds to the extent that it is used for a separate, say commercial, purpose because it would not then be occupied with the residence, but would be premises on which a business is conducted.
Although the Hyman case was heard after the new updates to HMRC manuals, the Tribunal did not consider this guidance when reaching its judgement. Accordingly, Hyman does not have any direct relevance to HMRC's new guidance. Indeed, the judge stated that 'HMRC's SDLT Manual does not give any guidance on the meaning of grounds...' which is now not factually correct.
Conclusion:
The classification of the land transaction is essential in determining the correct SDLT, and the distinction between residential and non-residential is crucial. Where the land is non-residential or ‘mixed use’, the lower rates of SDLT will be applied.
Getting this right can prove very valuable to the client!
Residential rates
| Relevant consideration |
SDLT rate |
Higher SDLT rate |
| Up to £125,000 |
0% |
3% |
| £125,001 - £250,000 |
2% |
5% |
| £250,001 - £925,000 |
5% |
8% |
| £925,001 - £1,500,000 |
10% |
13% |
| £1,500,001 + |
12% |
15% |
Non-residential rates
| Relevant consideration |
SDLT rate |
| Up to £150,000 |
0% |
| £150,001 - £250,000 |
2% |
| £250,001 + |
5% |
SDLT is becoming increasingly complex. If in doubt, seek professional advice.
Got an SDLT query? We’re here to help.
Get in touch via our SDLT advisory service or emailing Suzanne.OHara@mooreni.co.uk