More clarity on the applicability of the mixed-use rate of Stamp Duty Land Tax

The Upper Tribunal ("UT") have recently provided some more clarity on whether the residential or non-residential rates of stamp duty land tax ("SDLT") should apply to a particular transaction.

The rate of SDLT charged in a transaction depends on whether the property is residential; or non-residential/mixed use. Residential properties are buildings that are used or suitable for use as a dwelling. Any land that forms part of the garden or grounds of that dwelling also falls within the definition of residential property. Non-residential property is anything that is not residential property. Historically non-residential rates have been much lower than residential rates and HMRC has therefore been carefully reviewing returns which may have been submitted with the incorrect rates.

In the recent case of Hyman v HMRC (appealed to the UT on 18 March 2021), the taxpayers argued that their properties were mixed use and, therefore, qualified for the lower SDLT rate. The taxpayers had all purchased properties with substantial plots of land and claimed that, for example, the nearby dilapidated barn, meadow, stable yard and paddocks were not residential in nature and would therefore mean that the whole transaction should be subject to the lower rates. The taxpayers argued that land can only be part of the garden or grounds of a dwelling if the land is needed for the reasonable enjoyment of the dwelling. 

The UT, however, confirmed that the words 'gardens and grounds' should take their ordinary meaning and there is not a requirement that gardens and grounds must be needed for the reasonable enjoyment of the dwelling in order to be considered residential property for SDLT purposes. They dismissed the appeal and agreed that the residential rates should apply.

The case serves as a further reminder that HMRC will look very carefully at SDLT returns which are filed using the mixed-use rates and each transaction should be considered to ensure the correct rates are applied.