David Hyman & Anor. v The Commissioners for HMRC

For Finance Act 2003 stamp duty land tax, land is residential property if it forms part of the garden or grounds of a dwelling. Section 116(1)(b) contains no separate quantitative limit based on what is required for reasonable enjoyment. Whether land forms part of the garden or grounds is a question of fact. External guidance and ministerial statements cannot add a qualification absent from clear statutory language. Capital gains tax permitted-area rules serve a different function and do not control the SDLT characterisation.

These conjoined appeals concerned higher-rate stamp duty land tax on properties containing substantial areas of land. The Upper Tribunal upheld First-tier Tribunal findings that all the relevant land formed part of the garden or grounds of the taxpayers’ dwellings under Finance Act 2003 section 116(1)(b): [2021] UKUT 68 (TCC); [2021] STC 740. The taxpayers argued that land counted as residential property only to the extent required for the reasonable enjoyment of the dwelling. They relied on HMRC guidance concerning analogous stamp duty legislation and a ministerial statement. The central issue was whether section 116(1)(b) imposed an objective quantitative limit on garden or grounds.

The appeals were dismissed. The Court of Appeal agreed with the Upper Tribunal that the relevant provisions of the Finance Act 2003 were clear and did not contain the proposed limitation.

1. Section 116(1)(b) requires the court or tribunal to determine as a matter of fact whether land is or forms part of the garden or grounds of a building used or suitable for use as a dwelling. It contains no objective external limit based on the land required for the reasonable enjoyment of the dwelling. Land does not cease to be residential property merely because the occupier could do without it.
2. External materials have a secondary role in statutory interpretation. Following the authoritative restatement in R (on the application of O) v Secretary of State for the Home Department [2022] UKSC 3, they may illuminate statutory context and purpose but cannot displace clear and unambiguous statutory words which do not produce absurdity.
3. The ministerial statement relied on by the taxpayers was inadmissible. The conditions in Pepper v Hart [1993] AC 593 were not met: there was no ambiguity or absurdity, and the statement was not clear and unequivocal about the meaning of the provision under consideration.
4. The Barras principle, stated in Barras v Aberdeen Steam Trawling and Fishing Co Ltd [1933] AC 402, concerned authoritative judicial interpretations of statutory words. It did not apply to HMRC guidance. The guidance was also directed to stamp duty, not SDLT, and lacked sufficient reasoning to carry significant weight. The observation in Pollen Estate Trustees v HMRC [2012] UKUT 277 (TCC), [2012] STC 2443, that SDLT was an entirely new tax was approved in the Court of Appeal: [2013] EWCA Civ 753; [2013] 1 WLR 3785.
5. The reasonable-enjoyment test in Taxation of Chargeable Gains Act 1992 section 222 served a different function. It operated within a permitted-area regime for capital gains tax relief, whereas section 116 characterised property for SDLT purposes. The court could not graft the proposed limitation onto section 116, applying the approach stated in James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd [1978] AC 141.

• Court of Appeal (Civil Division) dismissed the taxpayers’ appeals and upheld the Upper Tribunal’s approach: [2022] EWCA Civ 185.
• Upper Tribunal (Tax and Chancery Chamber) upheld the First-tier Tribunal’s findings that the relevant land fell within section 116(1)(b) of the Finance Act 2003: [2021] UKUT 68 (TCC); [2021] STC 740.
• First-tier Tribunal found, as a matter of fact, that the relevant land formed part of the garden or grounds of the dwellings. The citation is not stated in the judgment.