Mixed-use Property Guide

Q: What Is A Mixed-Use Property?

A mixed-use property consists of property classed as residential, such as a dwelling or the garden or grounds of a dwelling, combined with non-residential property, where a part of the land acquired is used for genuine commercial purposes, such as farming, an office or other commercial use.

Q: What are they types Of Mixed-Use Property?

Typically, a mixed-use property will consist of a building that has shops, offices or other commercial premises on the ground floor and residential flats above. Another example is a dwelling and its garden which is acquired with other land that are actively and substantially used for a commercial purpose such as where the land is leased to a farmer for the purposes of the farming business.

Q: Why are mixed-use properties trending?

With the top rate of SDLT on mixed-use property at 5% compared with SDLT rates of up to 17% on property that is wholly residential in nature, there is considerable interest from purchasers in discovering whether there may be reasonable grounds to claim that the property being acquired either in one land transaction or in a linked transaction has an element of non-residential use so that the higher rates of tax for wholly residential properties can legitimately be avoided.

Q: Can you have commercial mixed-use property?

Yes and in fact, the commercial use of a part of the property being acquired or a property acquired in a linked transaction is the main reason why a property will be treated as mixed-use. Other reasons for mixed-use include where land acquired with the dwelling has no functional purpose or benefit in relation to the residential use.

Q: What are the tax benefits of mixed-use property?

The acquisition of mixed-use property means that for SDLT purposes, the top rate of tax is 5% compared with rates of up to 17% for property that is wholly residential in nature.

Introduction to the mixed-use property guide

Stamp Duty Land Tax (SDLT) is a tax on purchasing a property in England and Northern Ireland. There are some important differences in the rates of tax charged, especially between the rates that apply to property that is entirely residential and property that consists of both residential and non-residential property, with the latter attracting potentially much lower top rates of tax.

The correct property designation as mixed-use can be complex and is best handled by an experienced tax lawyer. It is essential to know whether a claim for mixed-use can be made at the time of purchase so that the claim can be made in the SDLT return and the reduced amount of stamp duty land tax paid.

Alternatively, buyers may discover they were eligible for lower rates of SDLT for mixed-use only after their purchase and seek to claim back their tax payment from HMRC by amending their return.

If you seek advice on claiming that a property is mixed residential and non-residential use, contact us using the form on this page.

What does this guide cover?

This guide to Mixed-use property sets out the main criteria that must be satisfied to claim that a property is mixed-use. For each criterion, the guide sets out the relevant HMRC published guidance and then what recent tax tribunal decisions have had to say about these points. You can use the columns in the centre of the chart to record notes about the relevant features of the properties you are buying to help you decide if you might qualify for mixed-use.

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Criteria	HMRC Published Guidance	Case Law
Garden or grounds	SDLTM00440 Considering whether the land is garden or grounds Limb (b) of the residential property definition in section 116(1) FA2003 refers to: ‘land that is or forms part of the garden or grounds of a building within paragraph (a) (including any building or structure on such land)’ The language of the statute should be given its natural meaning, so dictionary definitions can be helpful. However, there are many different dictionary definitions of ‘garden’ and ‘grounds’. These may be useful indicators when applied to the land, but none are determinative. Generally speaking, the definitions of ‘garden’ are more helpful than ‘grounds’. The definition of ‘garden or grounds’ has been examined by the courts in the past for other taxes, but only more recently in the context of SDLT. See for example: [Myles-Till [2020] UKFTT 127 (TC), Brandbros [2021] UKFTT 157(TC), Hyman/Goodfellow/Pensfold [2021] UKUT 68 (TCC)]. Cases relating to other regimes can be helpful (see for instance, Rockall v Department for Environment, Food and Rural Affairs [2008] EWHC 2408 (Admin)). Still, we must be careful of not to be over-reliant on them. For the purposes of SDLT, there is no statutory concept of ‘reasonable enjoyment’ and no statutory size limit that determines what ‘garden or grounds’ means SDLTM00440	145. HMRC’s manual, SDLTM00470 - extent of land and geographic factors states that the extent/size of land in question will also be relevant in relation to a building and that the test is not simply whether the land comprises garden or grounds but whether it comprises the gardens or grounds of the dwelling. [Emphasis] 147. GW stated that if the grazing lands and the Woodland Trust land were [sic] disposed of, then the property would have a perfectly adequate garden and grounds. The property would, however, require the driveway through the grazing lands in order to obtain access. 148. The Tribunal considered that the extent of land, the grazing land and Woodland Trust land do not form part of the garden or grounds of the dwelling. 153. The Tribunal again adopts the approach of Judge Citron in Myles-Till that “the words “of” and “use” indicate that the use or function of adjoining land itself must support the use of the building concerned as a dwelling. The grazing land and Woodland Trust land do not provide that support.” Withers v HMRC 66. In Hyman v HMRC [2019] UKFTT 469 (TC), in a passage which has been quoted in a number of subsequent cases, I said at [62]: “[62] In my view 'grounds' has, and is intended to have a wide meaning. It is an ordinary word, and its ordinary meaning is land attached to or surrounding a house which is occupied by the house and is available to the owners of the house for them to use. I use the expression 'occupied with the house' to mean that the land is available to the owners to use as they wish. It does not imply a requirement for active use. 'Grounds' is clearly a term which is more extensive than 'garden', which connotes some degree of cultivation. It is not a necessary feature of grounds that they are used for ornamental or recreational purposes. Grounds need not be used for any particular purpose and can, as in this case, be allowed to grow wild. I do not consider it relevant that the grounds and gardens are separated from each other by hedges or fences. This may simply be ornamental, or may serve the purpose of delineating different areas of land as being for different uses. Nor is it fatal that other people have rights over the land. The fact that there is a right of way over grounds might impinge on the owners' enjoyment of the grounds and even impose burdensome obligations on them, but such rights to not make the grounds any the less the grounds of that person's residence. The land would not constitute grounds to the extent that it is used for a separate, eg commercial purpose. It would not then be occupied with the residence but would be the premises on which a business is conducted.” (my emphasis) 67. Mr Cannon reads the highlighted text to mean that if part of a property is used for a separate commercial purpose, it does not form part of the garden or grounds in the first place, so that part of the property is non-residential. 68. He also quotes HMRC’s guidance in SDLTM00460 which states: “The aim of the legislation is to distinguish between residential and non-residential status, so it is logical that where land is in use for a commercial rather than purely domestic purpose, the commercial use would be a strong indicator that the land is not the ‘garden or grounds’ of the relevant building. It would be expected that the land had been actively and substantively exploited on a regular basis for this to be the case.” 69. Mr Cannon’s reading of my remarks is correct. The use of a particular part of a property is crucial in determining whether that part is residential or not. If that part has a separate non-residential (usually commercial) use, then it is not part of the garden or grounds of the property and it is non-residential property for the purposes of section 116(1)(b). Conversely if, despite the use of that part, it is still considered to form part of the garden or grounds of the property, then the actual use to which it is put is irrelevant: that part is a residential property by virtue of section 116(1)(b). Kozlowski v HMRC
Status of land	SDLTM00445 Establish the status of the building first. Once it has been established that a building falls within section 116 (1) (a) FA2003, (‘a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use’) all land forming part of the ‘garden or grounds’ of that building will also be residential property. It is, therefore, crucial that the nature of the building, and more specifically, its status as a dwelling, must be established first. It follows that if at the effective date, there is no building that is used or suitable for use as a dwelling or in the process of being constructed or adapted for such use, then the associated land under consideration is not residential property. SDLTM00445	153. The Tribunal again adopts the approach of Judge Citron in Myles-Till that “the words “of” and “use” indicate that the use or function of adjoining land itself must support the use of the building concerned as a dwelling. The grazing land and Woodland Trust land do not provide that support.” Withers v HMRC 40. We are satisfied that the garage should be treated as a building or structure in the grounds or garden of the Property. Therefore, as a matter of statutory interpretation, the garage is treated as residential property under section 116 regardless of the use to which it is put. Under section 116(1)(a) the house at the Property, which was and continues to be used as a residential property, is treated as “residential property”. Section 116(1)(b) then extends that treatment to the garden and grounds of the house, including any buildings or structures and those areas. There is no limitation in section 116(1)(b) to areas which are used for residential purposes. Brandbros Limited v HMRC 50. I note HMRC’s representation that the obiter comments by the FTT in Brandbros to the effect that the existence of a lease should not be considered in determining whether a property is a residential property. I do not find those comments helpful. Ridgeway v HMRC
Historic and future use	SDLTM00450 Considering whether land is garden or grounds – Historic and Future use Historic use can be relevant The status of the land in question must be assessed at the effective date of the transaction but that does not mean that only the use on that day will be considered. The aim of the legislation is to capture the real or true relationship of the land to the building at the time of the land transaction. So provided the building still falls within section 116 (1) (a) FA2003 at the effective date, the history of use of the land is relevant in considering the nature/status of the land at the effective day. We should seek to establish the traditional or habitual use of the land to establish its true relationship to the building. This can be difficult but you will be looking for customary, continued or regular use. Use that is ephemeral or appears to be part of an artificial/contrived arrangement will not be indicative of the true relationship of the land to the building. Where a purchaser is seeking to rely on the historic established use of land that is not in such use at the effective day, HM Revenue and Customs (HMRC) will expect the purchaser to retain and be able to provide evidence to support that use upon any request in connection with the relevant Stamp Duty Land Tax (SDLT) return. No evidence needs to be sent to HMRC when the SDLT return is submitted. Future use is not relevant but the status of land can alter over time Although the historic use of the land will be relevant, future use is not. So the purchaser’s intentions are irrelevant. This means that the same piece of land may constitute ‘garden or grounds’ in one purchase but not in another at a different time. For instance, a purchaser (Person A) may acquire the garden of a dwelling (whether or not fenced/walled off at that time from the rest of the vendor’s property) separately from the dwelling, with the intention to use it for commercial purposes. If at the time of the purchase the garden was enjoyed as a garden by the residents of the dwelling (i.e. the vendor) then the purchase will be of residential property regardless of the fact that the land is being purchased and the dwelling is not. However, if the same land is subsequently sold on by Person A then it may be the case that by the time of the subsequent sale it is no longer used as the garden of a dwelling and has therefore become non-residential land. SDLTM00450	45. Therefore Section 44 which provides that the date of transaction is the date of completion, needs to be interpreted in the context of the operation and design of SDLT. 46. Mr Cannon is, in effect, arguing that the transaction to which the SDLT must be applied should be judged by reference to the characteristics of the Property viewed at the end of the date of completion of the purchase of 27 July 2018, but that ignores the transactional nature of SDLT. The transaction to which the SDLT in dispute in this appeal relates is the purchase of the Property as provided in the contract for purchase and completed by the legal transfer on 27 July 2018. The subject matter of that transaction was of a property which was wholly residential. No lease had been granted over the garage. 47. It was only later, after the completion of the transaction to purchase the Property, that another transaction took place, in the form of the grant of the lease over the garage. The fact that the grant of the lease took place on the same day has no effect on the SDLT treatment of the purchase of the Property. Indeed, the grant of the lease over the garage is another separate transaction, subject to SDLT (albeit that while notifiable, no SDLT is due as a result of the amount of rent payable). Brandbros Limited v HMRC 50. I note HMRC’s representation that the obiter comments by the FTT in Brandbros to the effect that the existence of a lease should not be considered in determining whether a property is a residential property. I do not find those comments helpful. Ridgeway v HMRC 57. I agree with HMRC that the principle in Ladson Preston, that one looks at the nature of the chargeable interest acquired at the time it was acquired, is applicable to mixed-use in the same way as it is applicable to MDR. 58. At the point of completion, the chargeable interest acquired by Mr Kozlowski was clearly wholly residential. The fact that a lease was engrafted onto that interest after it had been acquired is irrelevant. 59. I accordingly find that the chargeable interest acquired by Mr Kozlowski was wholly residential. Kozlowski v HMRC
Further factors	SDLTM00455 Considering whether the land is garden or grounds - Forming a balanced judgement A balanced judgement as to the status of land involves weighing up all relevant factors. In considering whether land forms part of the garden or grounds of a building, a wide range of factors come into consideration. No single factor is likely to be determinative by itself. However, not all factors are of equal weight either, and one strong factor can outweigh several weaker contrary indicators. Where a number of contrasting indicators exist, weigh up all the factors in order to come to a balanced judgement of whether the land in question constitutes a ‘garden or grounds’. This judgement will apply to all the land being considered. SDLTM00455	115. In determining whether the woodland formed part of the grounds of The How, we have taken no account of the following points: (1) The fact that the initial SDLT return was made on the basis that the land was entirely residential. 20 (2) The position or potential position in relation to planning consent for change of use of the woodland, or the basis of its rateable valuation. (3) Whether or not the woodland was within the legal curtilage of The How. (4) Whether or not the woodland fell within section 116(1)(c). 116. We have adopted the approach suggested in Hyman UT and endorsed by the Court of Appeal in Hyman of weighing up all material factors, based on the FTT’s relevant findings of fact. We have taken the following factors in particular into account in reaching our decision, all of which were taken into account by the FTT: (1) There was no evidence of the use or exploitation of the woodland for commercial purposes. Nor was there any evidence of the use or exploitation of the woodland for any purpose other than that of woodland. (2) The woodland provided privacy and security to The How by virtue of its location as a hillside barrier between The How and the River Ouse. (3) The woodland fell within the legal title to the property. (4) The position and layout of the land and outbuildings was such that the woodland was not inordinately distant from the house and its size and location increased the privacy and security of The How from the south. (5) The woodland was densely populated and relatively inaccessible. 117. As regards accessibility, we have set out above (in relation to Ground 1(a)) the reasons for our conclusion that this is a factor to be taken into account in the evaluation but is not determinative. We have also set out above (in relation to Ground 2(b)) the reasons for our conclusion that the existence of any tree preservation orders would allow the woodland to be grounds. 123. In considering this question, it is important not to divorce from its context the reference by Judge McKeever in Hyman FTT to land “being available to the owners to use as they wish” (set out at paragraph 31 above). The judge was there explaining what she meant by grounds being land which is “occupied by the house”, and formed part of her statement, with which we agree, that use need not be active, and nor was it necessary for grounds to be used for ornamental or recreational purposes. Importantly, in that passage, Judge McKeever went on to state that it was not fatal that other people might have rights over the land and that “a right of way over grounds might impinge on the owners’ enjoyment of the grounds and even impose burdensome obligations on them, but such rights do not make the grounds any the less the grounds of that person’s residence”. Again, we endorse that statement. This approach is, in our view, consistent with the conclusion in Hyman that it is not necessary for a garden or grounds to be needed for the reasonable enjoyment of a dwelling. Since binding authority now establishes that “grounds” are not confined to land necessary for the reasonable enjoyment of a dwelling, it is in our view consistent that third parties may have rights over the grounds or use the grounds, for example, under planning or environmental law, without them ceasing to be grounds of the dwelling. Whether or not the land is used for a commercial purpose, which is clearly a relevant factor, is a separate question. In this appeal, the FTT found no evidence of any use other than as woodland, which provided privacy and security to The How.
Use	SDLTM00460 Considering whether land is garden or grounds - Use Although all factors must be taken into account and weighed against each other, the use of the land is potentially the most significant indicator of whether the land is ‘garden or grounds’. The aim of the legislation is to distinguish between residential and non-residential status, so it is logical that where land is in use for a commercial rather than purely domestic purpose, the commercial use would be a strong indicator that the land is not the ‘garden or grounds’ of the relevant building. It would be expected that the land had been actively and substantively exploited on a regular basis for this to be the case. A large number of activities taking place on land may have a domestic or commercial character depending on the individual facts, so it is likely that HM Revenue and Customs (HMRC) would expect to see evidence of commercial use. For example beekeeping, grazing and equestrian activities are all activities which could be purely for leisure or could be performed on a commercial basis. Parkland which, whilst grazed by livestock, primarily provides an appealing setting for a dwelling and on which the livestock are not kept on a commercial basis is likely to remain the ‘garden or grounds’ of the relevant building. In contrast the same land grazed by livestock under a genuine commercial arrangement would be far less likely to be the ‘garden or grounds’ of the building. The grazed land might also have a value as part of a ‘treasured view’ from the dwelling. In this case the relative uses of the land would have to be weighed up in deciding whether it formed part of the ‘garden or grounds’ of the dwelling. Where a lease has been granted to a third party for exclusive occupation of the land, this may be an indicator of non-residential use. However, occasionally allowing third parties to occupy or exploit the land is unlikely to mean that the land ceases to be ‘garden or grounds’. Where a lease or licence is in place, the true nature (including commencement and duration) of the agreement will need to be established. Certain types of land can be expected to be ‘garden or grounds’ or be expected to be commercial land unless otherwise established. So paddocks and orchards will usually be residential unless actively and substantively exploited on a regular basis. However, where a field usually exploited for an arable agricultural purpose is sitting fallow, this is not an indicator that it has become a ‘garden or grounds’. Fallow periods are an integral part of the commercial management of farmland. Such land may have been exploited using agricultural machinery over a period of time, and so is unlikely to have the nature of ‘gardens or grounds’. SDLTM004060	[62] In my view ‘grounds’ has, and is intended to have, a wide meaning. It is an ordinary word and its ordinary meaning is land attached to or surrounding a house which is occupied with the house and is available to the owners of the house for them to use. I use the expression ‘occupied with the house’ to mean that the land is available to the owners to use as they wish. It does not imply a requirement for active use. ‘Grounds’ is clearly a term which is more extensive than ‘garden’ which connotes some degree of cultivation. It is not a necessary feature of grounds that they are used for ornamental or recreational purposes. Grounds need not be used for any particular purpose and can, as in this case, be allowed to grow wild. I do not consider it relevant that the grounds and gardens are separated from each other by hedges or fences. This may simply be ornamental, or may serve the purpose of delineating different areas of land as being for different uses. Nor is it fatal that other people have rights over the land. The fact that there is a right of way over grounds might impinge on the owners’ enjoyment of the grounds and even impose burdensome obligations on them, but such rights to not make the grounds any the less the grounds of that person’s residence. Land would not constitute grounds to the extent that it is used for a separate, eg commercial purpose. [Emphasis] It would not then be occupied with the residence, but would be the premises on which a business is conducted. Hyman v HMRC 58. The grazing lease was of commercial benefit to the Appellants. Although the rent was not large, it was more than a peppercorn and the advantage of Ms Pragnell’s horses keeping the grass in order was of considerable financial benefit to the Appellants. 59. Adopting the nine pointers identified by the First-tier Tribunal in Faiers I comment as follows: (1) “Grounds of a dwelling” in this appeal clearly refers to the garden and tennis court; (2) The discussion in HMRC’s SDLT Manual refers to historic and future use; layout; proximity to the dwelling. The paddock, although lying alongside the end of the garden and tennis court is not close to the dwelling house and is not visible from it; (3) There is only one small gate between the gardens and the paddock; (4) There is common ownership between the dwelling house, gardens, tennis court and the paddock; 9 (5) Although adjacent to the gardens and tennis court the paddock does not form an integral part of the property; (6) The paddock does not support the dwelling house nor the garden nor the tennis court;’ (7) The paddock is used for a separate purpose unconnected with the dwelling house; (8) Although Ms Pragnell has a right of access to the paddock over the gardens, she does not in fact exercise this right and to do so would cause damage to the lawns. (9) Ms Pragnell’s grazing lease results in the paddock not forming part of the grounds of the dwelling. 60. I find the HMRC should not have issued the closure notice seeking additional SDLT for the following reasons: (1) The paddock is not visible from the dwelling house nor from the gardens; (2) There is only one small gate access from the gardens to the paddock; (3) Ms Pragnell was able to access the paddock from the bridle path without having to enter the Appellant’s garden; (4) The grazing lease is commercial resulting in the Property consisting of residential and non-residential property; (5) The title to the dwelling house, gardens and tennis court is distinct from the title to the paddock. (6) The Appellants would not have bought the paddock if it had been possible to exclude it from the purchase; 61. The appeal is accordingly allowed. Suterwalla v HMRC 50. Having considered all the materials before me, I have come to the view that the electricity distribution network does not prevent all of the land adjoining Agester Lodge constituting the grounds of that dwelling. I have come to this conclusion because: (1) The land in question is contiguous with and surrounds the dwelling. No part of it is separated by a road or similar physical feature. There is no suggestion that the land is more extensive than might be appropriate. There is no suggestion that the land has been used otherwise for its present purpose. (2) I accept that the electricity distribution network is part of a commercial operation carried on by a third party, but I have already held that this factor in itself is not determinative. (3) The level of physical intrusion (one pole and some overhead cables) is not extensive. The wires and pole do not affect the layout/appearance of the land to any material extent and do not physically “break up” the land. The appearance of the land is of a coherent whole over which the cables pass. (4) The safety issues which the transmission of electricity generate restrict the activities which can be carried on close to the cables, but they do not prevent the landowner doing anything at all under the cables. Grass can be mown, so that the land under and around the cables is indistinguishable from the rest of the land. Low-level activities (such as cultivation or sheep grazing) can be carried on safely under the cables. The photographic evidence shows that the relevant land is well maintained, and the children’s play fort has been erected in proximity to the wires and pole. 51. In terms of its place on the spectrum which runs between rights of way at one end and the type and scale of “alternative” (non-dwelling related) use seen in Withers at the other, I consider that the electricity distribution network and EPN’s rights in relation to it are far removed from the type of use and intrusion seen in Withers and can fairly be described as akin to a right of way, something which impinges on the owner’s enjoyment of the grounds but does not in any realistic way make the affected land any less part of the grounds of the dwelling. James Faiers v HMRC 62. In Pensfold v HMRC [2020] UKFTT 0116 (TC), the company acquired a farm including 27 acres of land, for which it argued the land was non-residential because of a grazing agreement. 63. Judge Gillett considered at [54] & [55] that: “54. However, at the time of purchase, the land was not being grazed. The marketing brochure advertising the Farm for sale made no mention of the sale being subject to grazing rights, and the sale and purchase contract likewise made no mention of the property being subject to grazing rights. Indeed, had the land, all 27 acres of it, been subject to grazing rights, that would have made the plans to develop a rare breeds farm rather difficult to implement. 55. We must therefore come to the conclusion that at the time of purchase, the property was not mixed use but was wholly residential.” James Gibson v HMRC TC/2022/00804
Layout of land and buildings	SDLTM00465 Considering whether land is garden or grounds – Layout of land and outbuildings The layout of the land and outbuildings will be significant. If the land is laid out so as to be suitable for day to day domestic enjoyment by the occupiers of the dwelling, this will be indicative that the land is likely to be ‘garden or grounds’. The presence of: domestic outbuildings; areas laid out for leisure use or carrying out hobbies; small orchards; or stables and paddocks suitable for leisure use Would all indicate that the land is ‘garden or grounds’. If the land is laid out so as to be suitable for use for a business on a commercial basis, this will be indicative that the land is unlikely to be ‘garden or grounds’. The presence of: commercial farming/horticulture; commercial woodland; commercial equestrian use; or some other commercial use Would all indicate that the land may not be ‘garden or grounds’. SDLTM00465	33. The Lane is used by the appellants since they use it whenever they come in or out of the Property. They can use it for walking as the members of the public do. Certainly, they do have the statutory obligations as does every other owner of a bridleway or public footpath. 34. At the time the Property was purchased, Mr Averdieck knew about the five new houses and the farm and his obligations, so he did try to exclude the Lane from the purchase but that did not prove to be possible. I accept that he never wanted to own it but it was part of the “package”. 35. Whilst I note Mr Cannon’s reliance on the penultimate sentence in paragraph 62 of Hyman 1, it falls to be read in the context of the whole of the paragraph. 36. I agree with Judge McKeever that the existence of burdensome obligations does not make the grounds any the less the grounds of the residence. The fences, hedgerows and trees have a functional purpose of providing the privacy and outlook which is lauded in the sales brochure so the fact that the Lane is beyond those, as is the main road, does not make the Lane less of a part of the grounds. 37. I also agree with Judge McKeever when she says that there is no requirement for active use, so whether or not the appellants use the Lane beyond the point at which they turn off the Lane to drive up to their gates, is irrelevant. 38. Whilst I accept that the farmer’s business is a commercial operation, it is conducted on his farm. It is no more conducted in the Lane than it is on the main road. If Mr Averdieck or any of the other five householders who use the Lane for access to their properties were to conduct business from their homes, they would not be conducting their business from the Lane. The Amazon drivers making deliveries do so in the course of Amazon’s business but Amazon’s premises do not include the Lane. 39. Mr Cannon argued that the portion of the Lane that was fenced off had no functional use for the Property. Certainly, that part of the fence which runs from the main road to his driveway does have a functional use because it is their access, but functional use of land is not the test. 40. In summary, whilst I accept that the appellants’ maintenance obligations do impose a burden, I do not accept that they impinge so heavily on them that the Lane cannot be residential property. In fact, I find that that argument strays into the question of “reasonable enjoyment” which cannot be considered. As I have indicated, I do not accept that the Lane constitutes a commercial operation. It is like any other public right of way and I find that it forms part of the grounds of the Property. Averdieck v HMRC
Geographical factors	SDLTM00470 Considering whether land is garden or grounds – Geographical factors Proximity to the dwelling Physical proximity of the land to the dwelling will be an indicator that it is more likely to be ‘garden or grounds’, however land which is separated from the dwelling may still fall within this category. Where the land is physically close to the dwelling and easily accessible from it or separated by a feature which can be easily crossed such as a small road or river, or even other land owned by third parties, this is suggestive of ‘garden or grounds’. Simply fencing off a section of land does not by itself make this “separated” from the dwelling. However, the less accessible the land is from the dwelling and the greater the degree of separation, the less the land is likely to be ‘garden or grounds’. A paddock located a substantial distance from the dwelling, especially if separated by non-residential or unconnected land, would not usually be the grounds of the dwelling. On the other hand land may be separated from the dwelling in circumstances which would normally indicate that it is not ‘garden or grounds’, but there may be a strong historical association whereby the use of the land is ancillary to the dwelling. If so then this will be an indicator in favour of ‘garden or grounds’. Extent of the land The extent/size of the land in question will also be relevant in relation the building. A small country cottage is unlikely to command dozens of acres of grounds but a stately home may do. Large tracts of fells/moorland etc. (even if purchased with a dwelling) are unlikely to be residential in nature. The test is not simply whether the land comprises gardens and grounds, but whether it comprises the gardens and grounds of a dwelling. SDLTM00470	145. HMRC’s manual, SDLT 00470 - extent of land and geographic factors states that the extent/size of land in question will also be relevant in relation to a building and that the test is not simply whether the land comprises garden or grounds but whether it comprises the gardens or grounds of the dwelling. [Emphasis] 147. GW stated that if the grazing lands and the Woodland Trust land where [sic] disposed of, then the property would have a perfectly adequate garden and grounds. The property would, however, require the driveway through the grazing lands in order to obtain access. 148. The Tribunal considered that the extent of land the grazing land and Woodland Trust land do not form part of the garden or grounds of the dwelling. 153. The Tribunal again adopts the approach of Judge Citron in Myles-Till that “the words “of” and “use” indicate that the use or function of adjoining land itself must support the use of the building concerned as a dwelling. The grazing land and Woodland Trust land do not provide that support.” Withers v HMRC
Legal factors and constraints	SDLTM00475 Considering whether land is garden or grounds - Legal Factors and Constraints Land may be subject to legal conditions – whether public or private law – that inhibit or permit certain uses. These conditions will be relevant in assessing its relationship to the building although it is likely that where these conditions are not being respected for any reason, actual use will prove more helpful than theoretical use. Planning consent or restrictions are frequently encountered in this context. Where permission is in place for non-residential use or under planning law non-residential use is lawful this is an indicator of the land not being ‘garden or grounds’. However planning law by itself is not determinative and actual use will normally be given greater weight. For instance: Where planning regulations prohibit commercial use but these are being breached by longstanding commercial use (particularly if the actual use is unlikely to be challenged by the planning authority) then this would indicate the land is not likely to be residential; or Alternatively where commercial use is permitted, but the land is actually being used for residential purposes then this would be an indicator that the land is likely to be residential. Private law matters such as terms of leases, restrictive covenants, contractual restrictions or easements will also be relevant. In contrast whether the property is registered under one land registry title or in more than one title will rarely be of relevance. If the building owner has no rights to access land, this can be an indication of non-residential nature, particularly if coupled with another factor such as geographical separation (see SDLTM00470). Conversely, if physically separated land can be accessed via an easement, this indicates it could be part of the ‘garden or grounds’. “Hindrances” on the land, such as rights of way for ramblers, or access by utility companies to pylons etc. will not usually prevent land from being part of the ‘garden or grounds’. The receipt of Basic Payment Scheme (BPS) payments (BPS on GOV.UK) for the land would be an indicator of commercial use of the land being considered, but does not, by itself, mean that the land is necessarily non-residential in nature. Examples of factors which may indicate non-residential land would include where: a non-domestic rateable value for the property has been assessed; non domestic rates are collected; or the property has been classified as agricultural land and buildings for the purposes of exemption from business rates. HM Revenue and Customs (HMRC) will closely scrutinise arrangements which appear to have been put in place for the purposes of changing the Stamp Duty Land Tax (SDLT) residential/non-residential status of land. SDLTM00475	49. At the risk of repeating myself, it is clear that one person having rights over another’s land will not of itself prevent that land constituting the grounds of the second person’s dwelling if it otherwise would. A right of way (even one which is burdensome) was the example given in Hyman. There is no suggestion in Judge McKeever’s comments that she was only considering rights for non-commercial purposes. Averdieck (although I am conscious of Mr Cannon’s views on that decision) would clearly indicate that there is no difference between commercial and non-commercial users so far as this point is concerned. I can see no reason to make such a distinction. The statutory question is whether the whole of the land in question comprises the “grounds” of a dwelling (here Agester Lodge), not whether part of it is used for a particular purpose. The answer to the second question may impact on the answer to the first, but the first question is the only one the statute poses. According to the Upper Tribunal in Hyam, Goodfellow and Pensfold, the question the law poses is to be answered with an open mind, considering the full range of factors relevant to the case in point, and that is what I propose to do. 50. Having considered all the materials before me, I have come to the view that the electricity distribution network does not prevent all of the land adjoining Agester Lodge constituting the grounds of that dwelling. I have come to this conclusion because (1) The land in question is contiguous with and surrounds the dwelling. No part of it is separated by a road or similar physical features. There is no suggestion that the land is more extensive than might be appropriate. There is no suggestion that the land has been used otherwise for its present purpose. (2) I accept that the electricity distribution network is part of a commercial operation carried on by a third party, but I have already held that this factor in itself is not determinative. (3) The level of physical intrusion (one pole and some overhead cables) is not extensive. The wires and pole do not affect the layout/appearance of the land to any material extent and do not physically “break up” the land. The appearance of the land is of a coherent whole over which the cables pass. (4) The safety issues which the transmission of electricity generate restrict the activities which can be carried on close to the cables, but they do not prevent the landowner doing anything at all under the cables. Grass can be mown, so that the land under and around the cables is indistinguishable from the rest of the land. Low-level activities (such as cultivation or sheep grazing) can be carried on safely under the cables. The photographic evidence shows that the relevant land is well maintained, and the children’s play fort has been erected in proximity to the wires and pole. 51. In terms of its place on the spectrum which runs between rights of way at one end and the type and scale of “alternative” (non-dwelling related) use seen in Withers at the other, I consider that the electricity distribution network and EPN’s rights in relation to it are far removed from the type of use and intrusion seen in Withers and can fairly be described as akin to a right of way, something which impinges on the owner’s enjoyment of the grounds but does not in any realistic way make the affected land any less part of the grounds of the dwelling.James Faiers v HMRC 36. I agree with Judge McKeever that the existence of burdensome obligations does not make the grounds any the less the grounds of the residence. The fences, hedgerows and trees have a functional purpose of providing the privacy and outlook which is lauded in the sales brochure so the fact that the Lane is beyond those, as is the main road, does not make the Lane less of a part of the grounds. 37. I also agree with Judge McKeever when she says that there is no requirement for active use, so whether or not the appellants use the Lane beyond the point at which they turn off the Lane to drive up to their gates, is irrelevant. 38. Whilst I accept that the farmer’s business is a commercial operation, it is conducted on his farm. It is no more conducted in the Lane than it is on the main road. If Mr Averdieck or any of the other five householders who use the Lane for access to their properties were to conduct a business from their homes, they would not be conducting their business from the Lane. The Amazon drivers making deliveries do so in the course of Amazon’s business but Amazon’s premises do not include the Lane. 39. Mr Cannon argued that the portion of the Lane that was fenced off had no functional use for the Property. Certainly that part of the fence which runs from the main road to his driveway does have a functional use because it is their access but functional use of land is not the test. 40. In summary, whilst I accept that the appellants’ maintenance obligations do impose a burden, I do not accept that they impinge so heavily on them that the Lane cannot be residential property. In fact, I find that that argument strays into the question of “reasonable enjoyment” which cannot be considered. As I have indicated, I do not accept that the Lane constitutes a commercial operation. It is like any other public right of way and I find that it forms part of the grounds of the Property. Averdieck v HMRC

Criteria

HMRC Published Guidance

Facts

Case Law

Garden or grounds

SDLTM00440 Considering whether the land is garden or grounds Limb (b) of the residential property definition in section 116(1) FA2003 refers to: ‘land that is or forms part of the garden or grounds of a building within paragraph (a) (including any building or structure on such land)’

The language of the statute should be given its natural meaning, so dictionary definitions can be helpful.

However, there are many different dictionary definitions of ‘garden’ and ‘grounds’. These may be useful indicators when applied to the land, but none are determinative. Generally speaking, the definitions of ‘garden’ are more helpful than ‘grounds’.

The definition of ‘garden or grounds’ has been examined by the courts in the past for other taxes, but only more recently in the context of SDLT. See for example: [Myles-Till [2020] UKFTT 127 (TC), Brandbros [2021] UKFTT 157(TC), Hyman/Goodfellow/Pensfold [2021] UKUT 68 (TCC)]. Cases relating to other regimes can be helpful (see for instance, Rockall v Department for Environment, Food and Rural Affairs [2008] EWHC 2408 (Admin)). Still, we must be careful of not to be over-reliant on them.

For the purposes of SDLT, there is no statutory concept of ‘reasonable enjoyment’ and no statutory size limit that determines what ‘garden or grounds’ means SDLTM00440

145. HMRC’s manual, SDLTM00470 - extent of land and geographic factors states that the extent/size of land in question will also be relevant in relation to a building and that the test is not simply whether the land comprises garden or grounds but whether it comprises the gardens or grounds of the dwelling. [Emphasis]

147. GW stated that if the grazing lands and the Woodland Trust land were [sic] disposed of, then the property would have a perfectly adequate garden and grounds. The property would, however, require the driveway through the grazing lands in order to obtain access.

148. The Tribunal considered that the extent of land, the grazing land and Woodland Trust land do not form part of the garden or grounds of the dwelling.

153. The Tribunal again adopts the approach of Judge Citron in Myles-Till that “the words “of” and “use” indicate that the use or function of adjoining land itself must support the use of the building concerned as a dwelling. The grazing land and Woodland Trust land do not provide that support.” Withers v HMRC

66. In Hyman v HMRC [2019] UKFTT 469 (TC), in a passage which has been quoted in a number of subsequent cases, I said at [62]: “[62] In my view 'grounds' has, and is intended to have a wide meaning. It is an ordinary word, and its ordinary meaning is land attached to or surrounding a house which is occupied by the house and is available to the owners of the house for them to use. I use the expression 'occupied with the house' to mean that the land is available to the owners to use as they wish. It does not imply a requirement for active use. 'Grounds' is clearly a term which is more extensive than 'garden', which connotes some degree of cultivation. It is not a necessary feature of grounds that they are used for ornamental or recreational purposes. Grounds need not be used for any particular purpose and can, as in this case, be allowed to grow wild. I do not consider it relevant that the grounds and gardens are separated from each other by hedges or fences. This may simply be ornamental, or may serve the purpose of delineating different areas of land as being for different uses. Nor is it fatal that other people have rights over the land. The fact that there is a right of way over grounds might impinge on the owners' enjoyment of the grounds and even impose burdensome obligations on them, but such rights to not make the grounds any the less the grounds of that person's residence. The land would not constitute grounds to the extent that it is used for a separate, eg commercial purpose. It would not then be occupied with the residence but would be the premises on which a business is conducted.” (my emphasis)

67. Mr Cannon reads the highlighted text to mean that if part of a property is used for a separate commercial purpose, it does not form part of the garden or grounds in the first place, so that part of the property is non-residential.

68. He also quotes HMRC’s guidance in SDLTM00460 which states: “The aim of the legislation is to distinguish between residential and non-residential status, so it is logical that where land is in use for a commercial rather than purely domestic purpose, the commercial use would be a strong indicator that the land is not the ‘garden or grounds’ of the relevant building. It would be expected that the land had been actively and substantively exploited on a regular basis for this to be the case.”

69. Mr Cannon’s reading of my remarks is correct. The use of a particular part of a property is crucial in determining whether that part is residential or not. If that part has a separate non-residential (usually commercial) use, then it is not part of the garden or grounds of the property and it is non-residential property for the purposes of section 116(1)(b). Conversely if, despite the use of that part, it is still considered to form part of the garden or grounds of the property, then the actual use to which it is put is irrelevant: that part is a residential property by virtue of section 116(1)(b). Kozlowski v HMRC

Status of land

SDLTM00445 Establish the status of the building first.

Once it has been established that a building falls within section 116 (1) (a) FA2003, (‘a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use’) all land forming part of the ‘garden or grounds’ of that building will also be residential property. It is, therefore, crucial that the nature of the building, and more specifically, its status as a dwelling, must be established first. It follows that if at the effective date, there is no building that is used or suitable for use as a dwelling or in the process of being constructed or adapted for such use, then the associated land under consideration is not residential property. SDLTM00445

153. The Tribunal again adopts the approach of Judge Citron in Myles-Till that “the words “of” and “use” indicate that the use or function of adjoining land itself must support the use of the building concerned as a dwelling. The grazing land and Woodland Trust land do not provide that support.” Withers v HMRC

40. We are satisfied that the garage should be treated as a building or structure in the grounds or garden of the Property. Therefore, as a matter of statutory interpretation, the garage is treated as residential property under section 116 regardless of the use to which it is put. Under section 116(1)(a) the house at the Property, which was and continues to be used as a residential property, is treated as “residential property”. Section 116(1)(b) then extends that treatment to the garden and grounds of the house, including any buildings or structures and those areas. There is no limitation in section 116(1)(b) to areas which are used for residential purposes. Brandbros Limited v HMRC

50. I note HMRC’s representation that the obiter comments by the FTT in Brandbros to the effect that the existence of a lease should not be considered in determining whether a property is a residential property. I do not find those comments helpful. Ridgeway v HMRC

Historic and future use

SDLTM00450 Considering whether land is garden or grounds – Historic and Future use
Historic use can be relevant
The status of the land in question must be assessed at the effective date of the transaction but that does not mean that only the use on that day will be considered. The aim of the legislation is to capture the real or true relationship of the land to the building at the time of the land transaction. So provided the building still falls within section 116 (1) (a) FA2003 at the effective date, the history of use of the land is relevant in considering the nature/status of the land at the effective day.

We should seek to establish the traditional or habitual use of the land to establish its true relationship to the building. This can be difficult but you will be looking for customary, continued or regular use. Use that is ephemeral or appears to be part of an artificial/contrived arrangement will not be indicative of the true relationship of the land to the building.

Where a purchaser is seeking to rely on the historic established use of land that is not in such use at the effective day, HM Revenue and Customs (HMRC) will expect the purchaser to retain and be able to provide evidence to support that use upon any request in connection with the relevant Stamp Duty Land Tax (SDLT) return. No evidence needs to be sent to HMRC when the SDLT return is submitted.
Future use is not relevant but the status of land can alter over time
Although the historic use of the land will be relevant, future use is not. So the purchaser’s intentions are irrelevant. This means that the same piece of land may constitute ‘garden or grounds’ in one purchase but not in another at a different time.
For instance, a purchaser (Person A) may acquire the garden of a dwelling (whether or not fenced/walled off at that time from the rest of the vendor’s property) separately from the dwelling, with the intention to use it for commercial purposes.
If at the time of the purchase the garden was enjoyed as a garden by the residents of the dwelling (i.e. the vendor) then the purchase will be of residential property regardless of the fact that the land is being purchased and the dwelling is not. However, if the same land is subsequently sold on by Person A then it may be the case that by the time of the subsequent sale it is no longer used as the garden of a dwelling and has therefore become non-residential land. SDLTM00450

45. Therefore Section 44 which provides that the date of transaction is the date of completion, needs to be interpreted in the context of the operation and design of SDLT.

46. Mr Cannon is, in effect, arguing that the transaction to which the SDLT must be applied should be judged by reference to the characteristics of the Property viewed at the end of the date of completion of the purchase of 27 July 2018, but that ignores the transactional nature of SDLT. The transaction to which the SDLT in dispute in this appeal relates is the purchase of the Property as provided in the contract for purchase and completed by the legal transfer on 27 July 2018. The subject matter of that transaction was of a property which was wholly residential. No lease had been granted over the garage.

47. It was only later, after the completion of the transaction to purchase the Property, that another transaction took place, in the form of the grant of the lease over the garage. The fact that the grant of the lease took place on the same day has no effect on the SDLT treatment of the purchase of the Property. Indeed, the grant of the lease over the garage is another separate transaction, subject to SDLT (albeit that while notifiable, no SDLT is due as a result of the amount of rent payable). Brandbros Limited v HMRC

50. I note HMRC’s representation that the obiter comments by the FTT in Brandbros to the effect that the existence of a lease should not be considered in determining whether a property is a residential property. I do not find those comments helpful. Ridgeway v HMRC

57. I agree with HMRC that the principle in Ladson Preston, that one looks at the nature of the chargeable interest acquired at the time it was acquired, is applicable to mixed-use in the same way as it is applicable to MDR.

58. At the point of completion, the chargeable interest acquired by Mr Kozlowski was clearly wholly residential. The fact that a lease was engrafted onto that interest after it had been acquired is irrelevant.

59. I accordingly find that the chargeable interest acquired by Mr Kozlowski was wholly residential. Kozlowski v HMRC

Further factors

SDLTM00455 Considering whether the land is garden or grounds - Forming a balanced judgement A balanced judgement as to the status of land involves weighing up all relevant factors. In considering whether land forms part of the garden or grounds of a building, a wide range of factors come into consideration. No single factor is likely to be determinative by itself. However, not all factors are of equal weight either, and one strong factor can outweigh several weaker contrary indicators. Where a number of contrasting indicators exist, weigh up all the factors in order to come to a balanced judgement of whether the land in question constitutes a ‘garden or grounds’. This judgement will apply to all the land being considered. SDLTM00455

115. In determining whether the woodland formed part of the grounds of The How, we have taken no account of the following points: (1) The fact that the initial SDLT return was made on the basis that the land was entirely residential. 20 (2) The position or potential position in relation to planning consent for change of use of the woodland, or the basis of its rateable valuation. (3) Whether or not the woodland was within the legal curtilage of The How. (4) Whether or not the woodland fell within section 116(1)(c).

116. We have adopted the approach suggested in Hyman UT and endorsed by the Court of Appeal in Hyman of weighing up all material factors, based on the FTT’s relevant findings of fact. We have taken the following factors in particular into account in reaching our decision, all of which were taken into account by the FTT: (1) There was no evidence of the use or exploitation of the woodland for commercial purposes. Nor was there any evidence of the use or exploitation of the woodland for any purpose other than that of woodland. (2) The woodland provided privacy and security to The How by virtue of its location as a hillside barrier between The How and the River Ouse. (3) The woodland fell within the legal title to the property. (4) The position and layout of the land and outbuildings was such that the woodland was not inordinately distant from the house and its size and location increased the privacy and security of The How from the south. (5) The woodland was densely populated and relatively inaccessible.

117. As regards accessibility, we have set out above (in relation to Ground 1(a)) the reasons for our conclusion that this is a factor to be taken into account in the evaluation but is not determinative. We have also set out above (in relation to Ground 2(b)) the reasons for our conclusion that the existence of any tree preservation orders would allow the woodland to be grounds.

123. In considering this question, it is important not to divorce from its context the reference by Judge McKeever in Hyman FTT to land “being available to the owners to use as they wish” (set out at paragraph 31 above). The judge was there explaining what she meant by grounds being land which is “occupied by the house”, and formed part of her statement, with which we agree, that use need not be active, and nor was it necessary for grounds to be used for ornamental or recreational purposes. Importantly, in that passage, Judge McKeever went on to state that it was not fatal that other people might have rights over the land and that “a right of way over grounds might impinge on the owners’ enjoyment of the grounds and even impose burdensome obligations on them, but such rights do not make the grounds any the less the grounds of that person’s residence”. Again, we endorse that statement. This approach is, in our view, consistent with the conclusion in Hyman that it is not necessary for a garden or grounds to be needed for the reasonable enjoyment of a dwelling. Since binding authority now establishes that “grounds” are not confined to land necessary for the reasonable enjoyment of a dwelling, it is in our view consistent that third parties may have rights over the grounds or use the grounds, for example, under planning or environmental law, without them ceasing to be grounds of the dwelling. Whether or not the land is used for a commercial purpose, which is clearly a relevant factor, is a separate question. In this appeal, the FTT found no evidence of any use other than as woodland, which provided privacy and security to The How.

Use

SDLTM00460 Considering whether land is garden or grounds - Use

Although all factors must be taken into account and weighed against each other, the use of the land is potentially the most significant indicator of whether the land is ‘garden or grounds’. The aim of the legislation is to distinguish between residential and non-residential status, so it is logical that where land is in use for a commercial rather than purely domestic purpose, the commercial use would be a strong indicator that the land is not the ‘garden or grounds’ of the relevant building. It would be expected that the land had been actively and substantively exploited on a regular basis for this to be the case. A large number of activities taking place on land may have a domestic or commercial character depending on the individual facts, so it is likely that HM Revenue and Customs (HMRC) would expect to see evidence of commercial use.
For example beekeeping, grazing and equestrian activities are all activities which could be purely for leisure or could be performed on a commercial basis. Parkland which, whilst grazed by livestock, primarily provides an appealing setting for a dwelling and on which the livestock are not kept on a commercial basis is likely to remain the ‘garden or grounds’ of the relevant building. In contrast the same land grazed by livestock under a genuine commercial arrangement would be far less likely to be the ‘garden or grounds’ of the building. The grazed land might also have a value as part of a ‘treasured view’ from the dwelling. In this case the relative uses of the land would have to be weighed up in deciding whether it formed part of the ‘garden or grounds’ of the dwelling.
Where a lease has been granted to a third party for exclusive occupation of the land, this may be an indicator of non-residential use. However, occasionally allowing third parties to occupy or exploit the land is unlikely to mean that the land ceases to be ‘garden or grounds’. Where a lease or licence is in place, the true nature (including commencement and duration) of the agreement will need to be established.
Certain types of land can be expected to be ‘garden or grounds’ or be expected to be commercial land unless otherwise established. So paddocks and orchards will usually be residential unless actively and substantively exploited on a regular basis. However, where a field usually exploited for an arable agricultural purpose is sitting fallow, this is not an indicator that it has become a ‘garden or grounds’. Fallow periods are an integral part of the commercial management of farmland. Such land may have been exploited using agricultural machinery over a period of time, and so is unlikely to have the nature of ‘gardens or grounds’. SDLTM004060

[62] In my view ‘grounds’ has, and is intended to have, a wide meaning. It is an ordinary word and its ordinary meaning is land attached to or surrounding a house which is occupied with the house and is available to the owners of the house for them to use. I use the expression ‘occupied with the house’ to mean that the land is available to the owners to use as they wish. It does not imply a requirement for active use. ‘Grounds’ is clearly a term which is more extensive than ‘garden’ which connotes some degree of cultivation. It is not a necessary feature of grounds that they are used for ornamental or recreational purposes. Grounds need not be used for any particular purpose and can, as in this case, be allowed to grow wild. I do not consider it relevant that the grounds and gardens are separated from each other by hedges or fences. This may simply be ornamental, or may serve the purpose of delineating different areas of land as being for different uses. Nor is it fatal that other people have rights over the land. The fact that there is a right of way over grounds might impinge on the owners’ enjoyment of the grounds and even impose burdensome obligations on them, but such rights to not make the grounds any the less the grounds of that person’s residence. Land would not constitute grounds to the extent that it is used for a separate, eg commercial purpose. [Emphasis] It would not then be occupied with the residence, but would be the premises on which a business is conducted. Hyman v HMRC

58. The grazing lease was of commercial benefit to the Appellants. Although the rent was not large, it was more than a peppercorn and the advantage of Ms Pragnell’s horses keeping the grass in order was of considerable financial benefit to the Appellants.

59. Adopting the nine pointers identified by the First-tier Tribunal in Faiers I comment as follows: (1) “Grounds of a dwelling” in this appeal clearly refers to the garden and tennis court; (2) The discussion in HMRC’s SDLT Manual refers to historic and future use; layout; proximity to the dwelling. The paddock, although lying alongside the end of the garden and tennis court is not close to the dwelling house and is not visible from it; (3) There is only one small gate between the gardens and the paddock; (4) There is common ownership between the dwelling house, gardens, tennis court and the paddock; 9 (5) Although adjacent to the gardens and tennis court the paddock does not form an integral part of the property; (6) The paddock does not support the dwelling house nor the garden nor the tennis court;’ (7) The paddock is used for a separate purpose unconnected with the dwelling house; (8) Although Ms Pragnell has a right of access to the paddock over the gardens, she does not in fact exercise this right and to do so would cause damage to the lawns. (9) Ms Pragnell’s grazing lease results in the paddock not forming part of the grounds of the dwelling.

60. I find the HMRC should not have issued the closure notice seeking additional SDLT for the following reasons: (1) The paddock is not visible from the dwelling house nor from the gardens; (2) There is only one small gate access from the gardens to the paddock; (3) Ms Pragnell was able to access the paddock from the bridle path without having to enter the Appellant’s garden; (4) The grazing lease is commercial resulting in the Property consisting of residential and non-residential property; (5) The title to the dwelling house, gardens and tennis court is distinct from the title to the paddock. (6) The Appellants would not have bought the paddock if it had been possible to exclude it from the purchase; 61. The appeal is accordingly allowed. Suterwalla v HMRC

50. Having considered all the materials before me, I have come to the view that the electricity distribution network does not prevent all of the land adjoining Agester Lodge constituting the grounds of that dwelling. I have come to this conclusion because: (1) The land in question is contiguous with and surrounds the dwelling. No part of it is separated by a road or similar physical feature. There is no suggestion that the land is more extensive than might be appropriate. There is no suggestion that the land has been used otherwise for its present purpose. (2) I accept that the electricity distribution network is part of a commercial operation carried on by a third party, but I have already held that this factor in itself is not determinative. (3) The level of physical intrusion (one pole and some overhead cables) is not extensive. The wires and pole do not affect the layout/appearance of the land to any material extent and do not physically “break up” the land. The appearance of the land is of a coherent whole over which the cables pass. (4) The safety issues which the transmission of electricity generate restrict the activities which can be carried on close to the cables, but they do not prevent the landowner doing anything at all under the cables. Grass can be mown, so that the land under and around the cables is indistinguishable from the rest of the land. Low-level activities (such as cultivation or sheep grazing) can be carried on safely under the cables. The photographic evidence shows that the relevant land is well maintained, and the children’s play fort has been erected in proximity to the wires and pole.

51. In terms of its place on the spectrum which runs between rights of way at one end and the type and scale of “alternative” (non-dwelling related) use seen in Withers at the other, I consider that the electricity distribution network and EPN’s rights in relation to it are far removed from the type of use and intrusion seen in Withers and can fairly be described as akin to a right of way, something which impinges on the owner’s enjoyment of the grounds but does not in any realistic way make the affected land any less part of the grounds of the dwelling. James Faiers v HMRC

62. In Pensfold v HMRC [2020] UKFTT 0116 (TC), the company acquired a farm including 27 acres of land, for which it argued the land was non-residential because of a grazing agreement. 63. Judge Gillett considered at [54] & [55] that: “54. However, at the time of purchase, the land was not being grazed. The marketing brochure advertising the Farm for sale made no mention of the sale being subject to grazing rights, and the sale and purchase contract likewise made no mention of the property being subject to grazing rights. Indeed, had the land, all 27 acres of it, been subject to grazing rights, that would have made the plans to develop a rare breeds farm rather difficult to implement. 55. We must therefore come to the conclusion that at the time of purchase, the property was not mixed use but was wholly residential.” James Gibson v HMRC TC/2022/00804

Layout of land and buildings

SDLTM00465 Considering whether land is garden or grounds – Layout of land and outbuildings The layout of the land and outbuildings will be significant. If the land is laid out so as to be suitable for day to day domestic enjoyment by the occupiers of the dwelling, this will be indicative that the land is likely to be ‘garden or grounds’. The presence of: domestic outbuildings; areas laid out for leisure use or carrying out hobbies; small orchards; or stables and paddocks suitable for leisure use Would all indicate that the land is ‘garden or grounds’. If the land is laid out so as to be suitable for use for a business on a commercial basis, this will be indicative that the land is unlikely to be ‘garden or grounds’. The presence of: commercial farming/horticulture; commercial woodland; commercial equestrian use; or some other commercial use Would all indicate that the land may not be ‘garden or grounds’. SDLTM00465

33. The Lane is used by the appellants since they use it whenever they come in or out of the Property. They can use it for walking as the members of the public do. Certainly, they do have the statutory obligations as does every other owner of a bridleway or public footpath. 34. At the time the Property was purchased, Mr Averdieck knew about the five new houses and the farm and his obligations, so he did try to exclude the Lane from the purchase but that did not prove to be possible. I accept that he never wanted to own it but it was part of the “package”.

35. Whilst I note Mr Cannon’s reliance on the penultimate sentence in paragraph 62 of Hyman 1, it falls to be read in the context of the whole of the paragraph.

36. I agree with Judge McKeever that the existence of burdensome obligations does not make the grounds any the less the grounds of the residence. The fences, hedgerows and trees have a functional purpose of providing the privacy and outlook which is lauded in the sales brochure so the fact that the Lane is beyond those, as is the main road, does not make the Lane less of a part of the grounds.

37. I also agree with Judge McKeever when she says that there is no requirement for active use, so whether or not the appellants use the Lane beyond the point at which they turn off the Lane to drive up to their gates, is irrelevant.

38. Whilst I accept that the farmer’s business is a commercial operation, it is conducted on his farm. It is no more conducted in the Lane than it is on the main road. If Mr Averdieck or any of the other five householders who use the Lane for access to their properties were to conduct business from their homes, they would not be conducting their business from the Lane. The Amazon drivers making deliveries do so in the course of Amazon’s business but Amazon’s premises do not include the Lane.

39. Mr Cannon argued that the portion of the Lane that was fenced off had no functional use for the Property. Certainly, that part of the fence which runs from the main road to his driveway does have a functional use because it is their access, but functional use of land is not the test.

40. In summary, whilst I accept that the appellants’ maintenance obligations do impose a burden, I do not accept that they impinge so heavily on them that the Lane cannot be residential property. In fact, I find that that argument strays into the question of “reasonable enjoyment” which cannot be considered. As I have indicated, I do not accept that the Lane constitutes a commercial operation. It is like any other public right of way and I find that it forms part of the grounds of the Property. Averdieck v HMRC

Geographical factors

SDLTM00470 Considering whether land is garden or grounds – Geographical factors Proximity to the dwelling
Physical proximity of the land to the dwelling will be an indicator that it is more likely to be ‘garden or grounds’, however land which is separated from the dwelling may still fall within this category. Where the land is physically close to the dwelling and easily accessible from it or separated by a feature which can be easily crossed such as a small road or river, or even other land owned by third parties, this is suggestive of ‘garden or grounds’.
Simply fencing off a section of land does not by itself make this “separated” from the dwelling. However, the less accessible the land is from the dwelling and the greater the degree of separation, the less the land is likely to be ‘garden or grounds’.
A paddock located a substantial distance from the dwelling, especially if separated by non-residential or unconnected land, would not usually be the grounds of the dwelling. On the other hand land may be separated from the dwelling in circumstances which would normally indicate that it is not ‘garden or grounds’, but there may be a strong historical association whereby the use of the land is ancillary to the dwelling. If so then this will be an indicator in favour of ‘garden or grounds’.

Extent of the land

The extent/size of the land in question will also be relevant in relation the building. A small country cottage is unlikely to command dozens of acres of grounds but a stately home may do. Large tracts of fells/moorland etc. (even if purchased with a dwelling) are unlikely to be residential in nature. The test is not simply whether the land comprises gardens and grounds, but whether it comprises the gardens and grounds of a dwelling. SDLTM00470

145. HMRC’s manual, SDLT 00470 - extent of land and geographic factors states that the extent/size of land in question will also be relevant in relation to a building and that the test is not simply whether the land comprises garden or grounds but whether it comprises the gardens or grounds of the dwelling. [Emphasis]

147. GW stated that if the grazing lands and the Woodland Trust land where [sic] disposed of, then the property would have a perfectly adequate garden and grounds. The property would, however, require the driveway through the grazing lands in order to obtain access.

148. The Tribunal considered that the extent of land the grazing land and Woodland Trust land do not form part of the garden or grounds of the dwelling.

153. The Tribunal again adopts the approach of Judge Citron in Myles-Till that “the words “of” and “use” indicate that the use or function of adjoining land itself must support the use of the building concerned as a dwelling. The grazing land and Woodland Trust land do not provide that support.” Withers v HMRC

Legal factors and constraints

SDLTM00475 Considering whether land is garden or grounds - Legal Factors and Constraints

Land may be subject to legal conditions – whether public or private law – that inhibit or permit certain uses. These conditions will be relevant in assessing its relationship to the building although it is likely that where these conditions are not being respected for any reason, actual use will prove more helpful than theoretical use. Planning consent or restrictions are frequently encountered in this context. Where permission is in place for non-residential use or under planning law non-residential use is lawful this is an indicator of the land not being ‘garden or grounds’. However planning law by itself is not determinative and actual use will normally be given greater weight. For instance: Where planning regulations prohibit commercial use but these are being breached by longstanding commercial use (particularly if the actual use is unlikely to be challenged by the planning authority) then this would indicate the land is not likely to be residential; or Alternatively where commercial use is permitted, but the land is actually being used for residential purposes then this would be an indicator that the land is likely to be residential.

Private law matters such as terms of leases, restrictive covenants, contractual restrictions or easements will also be relevant. In contrast whether the property is registered under one land registry title or in more than one title will rarely be of relevance. If the building owner has no rights to access land, this can be an indication of non-residential nature, particularly if coupled with another factor such as geographical separation (see SDLTM00470).

Conversely, if physically separated land can be accessed via an easement, this indicates it could be part of the ‘garden or grounds’. “Hindrances” on the land, such as rights of way for ramblers, or access by utility companies to pylons etc. will not usually prevent land from being part of the ‘garden or grounds’. The receipt of Basic Payment Scheme (BPS) payments (BPS on GOV.UK) for the land would be an indicator of commercial use of the land being considered, but does not, by itself, mean that the land is necessarily non-residential in nature. Examples of factors which may indicate non-residential land would include where: a non-domestic rateable value for the property has been assessed; non domestic rates are collected; or the property has been classified as agricultural land and buildings for the purposes of exemption from business rates. HM Revenue and Customs (HMRC) will closely scrutinise arrangements which appear to have been put in place for the purposes of changing the Stamp Duty Land Tax (SDLT) residential/non-residential status of land. SDLTM00475

49. At the risk of repeating myself, it is clear that one person having rights over another’s land will not of itself prevent that land constituting the grounds of the second person’s dwelling if it otherwise would. A right of way (even one which is burdensome) was the example given in Hyman. There is no suggestion in Judge McKeever’s comments that she was only considering rights for non-commercial purposes. Averdieck (although I am conscious of Mr Cannon’s views on that decision) would clearly indicate that there is no difference between commercial and non-commercial users so far as this point is concerned. I can see no reason to make such a distinction. The statutory question is whether the whole of the land in question comprises the “grounds” of a dwelling (here Agester Lodge), not whether part of it is used for a particular purpose. The answer to the second question may impact on the answer to the first, but the first question is the only one the statute poses. According to the Upper Tribunal in Hyam, Goodfellow and Pensfold, the question the law poses is to be answered with an open mind, considering the full range of factors relevant to the case in point, and that is what I propose to do.

50. Having considered all the materials before me, I have come to the view that the electricity distribution network does not prevent all of the land adjoining Agester Lodge constituting the grounds of that dwelling. I have come to this conclusion because (1) The land in question is contiguous with and surrounds the dwelling. No part of it is separated by a road or similar physical features. There is no suggestion that the land is more extensive than might be appropriate. There is no suggestion that the land has been used otherwise for its present purpose. (2) I accept that the electricity distribution network is part of a commercial operation carried on by a third party, but I have already held that this factor in itself is not determinative. (3) The level of physical intrusion (one pole and some overhead cables) is not extensive. The wires and pole do not affect the layout/appearance of the land to any material extent and do not physically “break up” the land. The appearance of the land is of a coherent whole over which the cables pass. (4) The safety issues which the transmission of electricity generate restrict the activities which can be carried on close to the cables, but they do not prevent the landowner doing anything at all under the cables. Grass can be mown, so that the land under and around the cables is indistinguishable from the rest of the land. Low-level activities (such as cultivation or sheep grazing) can be carried on safely under the cables. The photographic evidence shows that the relevant land is well maintained, and the children’s play fort has been erected in proximity to the wires and pole. 51. In terms of its place on the spectrum which runs between rights of way at one end and the type and scale of “alternative” (non-dwelling related) use seen in Withers at the other, I consider that the electricity distribution network and EPN’s rights in relation to it are far removed from the type of use and intrusion seen in Withers and can fairly be described as akin to a right of way, something which impinges on the owner’s enjoyment of the grounds but does not in any realistic way make the affected land any less part of the grounds of the dwelling.James Faiers v HMRC

36. I agree with Judge McKeever that the existence of burdensome obligations does not make the grounds any the less the grounds of the residence. The fences, hedgerows and trees have a functional purpose of providing the privacy and outlook which is lauded in the sales brochure so the fact that the Lane is beyond those, as is the main road, does not make the Lane less of a part of the grounds.

37. I also agree with Judge McKeever when she says that there is no requirement for active use, so whether or not the appellants use the Lane beyond the point at which they turn off the Lane to drive up to their gates, is irrelevant.

38. Whilst I accept that the farmer’s business is a commercial operation, it is conducted on his farm. It is no more conducted in the Lane than it is on the main road. If Mr Averdieck or any of the other five householders who use the Lane for access to their properties were to conduct a business from their homes, they would not be conducting their business from the Lane. The Amazon drivers making deliveries do so in the course of Amazon’s business but Amazon’s premises do not include the Lane.

39. Mr Cannon argued that the portion of the Lane that was fenced off had no functional use for the Property. Certainly that part of the fence which runs from the main road to his driveway does have a functional use because it is their access but functional use of land is not the test.

40. In summary, whilst I accept that the appellants’ maintenance obligations do impose a burden, I do not accept that they impinge so heavily on them that the Lane cannot be residential property. In fact, I find that that argument strays into the question of “reasonable enjoyment” which cannot be considered. As I have indicated, I do not accept that the Lane constitutes a commercial operation. It is like any other public right of way and I find that it forms part of the grounds of the Property. Averdieck v HMRC

Mixed Use Property Frequently Asked Questions

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Important Disclaimer

This guide is subject to changes in law and practice and is intended to provide general guidance only and should not be relied on as providing legal, tax or accounting advice. This guide should not be used as a basis for acting or refraining from acting in any particular matter, and users should take their own specific professional advice before doing so. No liability or responsibility can be accepted for any loss arising as a result of this guide, and users should only proceed on this basis.

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