The purchase of property in England is usually subject to Stamp Duty Land Tax. The rates of taxation are different for residential and non-residential property. Non-residential property generally has a lower rate than residential. If a property has a mixed residential and non-residential use, then generally speaking it will be taxed as a non-residential property and benefit from lower rates. However the classification of property as either residential or non- residential is not always straight forward. An example is a residential property which comprises a large extent of land. Bare land is usually treated as non-residential. However “garden or grounds” belonging to a dwelling may be residential.
In the recent case of Hyman v HMRC  UKFTT 0469 (TC) the First-tier Tribunal has held that “grounds” as referred to in section 116(1)(b) of the Finance Act 2003 has a wide meaning. It held that grounds comprised land that formed part of or surrounded a dwelling that was occupied with the dwelling and was available for use by the owners. There was no requirement for the owners to actively use the land. It also found that public access to part of the land (for example, access to a public bridleway), and separation of part of the land by hedges or fences, did not prevent the land from being grounds.
In order for land to be non-residential it must be used for a separate, commercial purpose. Factors which will be relevant will be the use of the land at the date of purchase, its size, layout and physical proximity to the dwelling. Agricultural use may be an indicator that the land is not “garden or grounds”. The individual facts of each case must however be carefully assessed before deciding whether to classify a property as residential or non-residential.
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