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Goodfellow v HMRC

Goodfellow v HMRC

Goodfellow v HMRC considers the meaning of residential property for SDLT purposes.

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Neil Whitworth

Stamp Taxes Senior Manager

KPMG LLP (UK)

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A recent First-tier Tribunal (FTT) case considered the meaning of residential property for SDLT purposes. In Goodfellow the taxpayers lost a claim for a repayment of SDLT made on the basis the equestrian property they had purchased was not wholly residential. Neither a home office, nor paddocks let for a nominal rent to a neighbour for her domestic use, were non-residential property.

The taxpayers had purchased an equestrian property in Hampshire and paid SDLT at the residential rates. They were subsequently advised that the purchase should have been chargeable to the lower ‘non-residential or mixed use’ rates and hence they could reclaim some of the SDLT paid. This was largely on the basis that a room above a garage was used as a home office and paddocks were let to a neighbour for her to graze her horses.

The FTT concluded that no such claim was possible as the purchased property was wholly residential. The Tribunal observed that a home office for the use of an occupant of the dwelling was in principle no different from a spare room, study or dining room, if that is where home working took place. In the particular case in point, the room had en-suite facilities and so was suitable for use as a guest suite or other domestic purposes.

The property was sold as an equestrian property, i.e. a residential property where horses are kept for the recreational use of the occupants of the dwelling. The equestrian facilities were necessary to the enjoyment of the property and without the paddocks and stabling, the property would cease to be an equestrian property. Therefore, the facilities were part of the grounds of the house and hence residential.

This conclusion was not disturbed by the fact some paddocks were let to a neighbour but were not used for any commercial purpose by either the homeowners or neighbour. The homeowners only charged a token £12 per annum rent used by the neighbour to graze horses (as opposed to, for example, using them in a livery business).

Consequently the purchase was wholly residential and no tax could be reclaimed. The relevance of this case is that it follows Hymans in confirming that land acquired with a house that has amenity value for the homeowner, taking into account the nature of the property as a whole, is residential property for SDLT purposes. Land that provides privacy to the house and grounds, a pleasant outlook or grazing for animals the owner keeps for leisure, is amenity land. Only where such land is in fact used (by the owner or another person) for genuine business purposes is the land potentially non-residential.

In light of this decision and that in Hyman, purchasers of residential properties with ancillary land or buildings should expect to pay SDLT at the higher, wholly residential rates unless they can demonstrate a commercial use of that part of the property, distinct from its residential use. It appears that commercial use could be had by the homeowner, or a third party. So, for example, fields or outbuildings used by the homeowner solely for the purposes of a genuine, commercially run farming business, or exclusively let or licensed to a farmer for his or her commercially run farming business, may still qualify as non-residential land, notwithstanding the fact the land might improve the outlook of the house or provide privacy or otherwise be suitable for domestic use.

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