Stamp duty land tax (SDLT) is on residential property. Which applies to land that forms the garden or grounds of the property. To ensure that the right rate of SDLT applied there, it’s important to learn Grounds and gardens for SDLT and Stamp Duty on Land & Garden.
Whatever land purchased with a property makes up its garden or grounds. The rules here are not the same as those applying for capital gains tax private house relief. HMRC have recently updated their guidance in this area.
Status of the building
The first step is to determine whether the land is residential land. Thus, also determines the status of the associated building. If the building is a residential property for SDLT purposes. Then all land forming part of the ‘garden or grounds’ is residential property. If at the time of sale the property is not capable of being uses as a dwelling. It is being constructed or adapted for residential use. The building is not the residential property for SDLT purposes. Thus, or any associated land is also not residential property.
Status of the land
Land that makes up the ‘garden or grounds’ of a building. Which counts as residential property for SDLT purposes will also be residential property. So, subject to SDLT residential property rates, even if it is sold from the building.
The key date is the date of the transaction. So, past use of the land taken into account by HMRC. Is order to establish the relationship between the land and the building. Future or planned future use is not relevant, although where use changes over time. Thus, the status of the land may also change.
No single factor
In deciding whether land counts as ‘garden or grounds’ a range of factors will come into play. There is no single determining factor. But, not all factors will carry equal weight. It is necessary to consider how land is used.
Questions to ask include
- Is there evidence that the land has been exploited on a commercial basis?
- If the activity could be for leisure or commercial purposes. Such as beekeeping or equestrian use, is there evidence of commercial use?
- Has a lease granted to a third party for the exclusive use of the land? This would suggest that the land is unlikely to be ‘garden or grounds’.
- Is the land of a type that would be expected to be ‘garden or grounds’ unless commercial use is established. Such as land used as a paddock or orchard?
- Is the land agricultural land which is sitting fallow? Such land is unlikely to be regarded as ‘garden or grounds’.
The nature and layout of any outbuildings can be significant in determining. Whether the land is ‘garden or grounds’. The presence of domestic outbuildings, areas laid out for hobbies. Or, small orchards or stables and paddocks suitable for leisure use would say. That the land is ‘garden or grounds’. The presence of commercial farming, commercial woodland, commercial equestrian use. Thus, other commercial use would suggest the contrary.
Size and proximity to dwelling
Physical proximity to the dwelling makes it more likely that the land is ‘garden or grounds’. Land separated from the building may also fall into this category.
The size of the land in relation to the size of the building will also be relevant. A small cottage is unlikely to have a garden and grounds of many acres but a stately home may do.
The Complete picture
In deciding the character of the land for SDLT purposes. It is necessary to look at the complete picture that emerges at the transaction date.
Extra note: FA 2003, s. 116(1)(a); HMRC’s Stamp Duty Land Tax Manual SDLTM00440ff.