Rural property buyers should be aware that Stamp Duty Land Tax calculations are now becoming more subjective. A recent First Tier Tribunal decision fell in favour of HMRC whereby a house with grazing paddock was all taxed at the higher residential rate (rather than the more advantageous mixed property use rate) because of the nature of the relationship of the house and the paddock. In this instance, even though a third party’s pony grazed the paddock, it was decided that the paddock was used as part of the grounds of the house, rather than as an agricultural field. There were other factors, but this was the main “takeaway” from this case.
The decision effectively qualified the principles used in assessing whether Land constitutes “Grounds”; helpful when trying to identify which rate of SDLT a purchaser will have to pay. Each case will be considered in light of its own individual characteristics.
One important principle for deciding was this: “Land will not be part of the grounds of a dwelling if it is used or occupied for a purpose separate from and unconnected to the dwelling.” Other points included privacy, security, accessibility, contiguity and whether there is a connection between the properties.
Prudent buyers should consult at an early stage with their land agent, accountant and/or solicitor to get a better understanding of how their purchase might be treated for tax purposes in order that they are not confronted by unexpected costs.
We have rural professional offices at Standerwick and Glastonbury who can help, contact the team on 01373 831010.