The Commissioners for HMRC v Taher Suterwalla & Anor

For SDLT, whether land is residential depends on the nature of the chargeable interest acquired at completion. The analysis is directed to the land forming the subject matter of that transaction, rather than to the effective date as an entire day or to a later event which changes the land’s use. A later lease may nevertheless provide evidence of the land’s character at completion, particularly where it formalises an earlier use. Whether land forms part of the grounds of a dwelling is a fact-sensitive, multi-factorial evaluation. No single factor is necessarily decisive. On an Edwards v Bairstow challenge, the Upper Tribunal should not interfere with a First-tier Tribunal’s evaluation unless there is an error of law or principle or the conclusion is rationally insupportable.

The respondents purchased a property comprising a dwelling house, gardens, a tennis court and a paddock. They returned the transaction as mixed-use for SDLT purposes, relying on the paddock as non-residential land. HMRC amended the return on the basis that the whole property was residential. The First-tier Tribunal allowed the respondents’ appeal: [2023] UKFTT 450 (TC).

HMRC appealed on three grounds. It argued that the First-tier Tribunal should have applied the approach in Ladson Preston Ltd v HMRC, should have disregarded a grazing lease granted after completion, and was not entitled to find that the paddock was outside the grounds of the dwelling. The central issues were the time at which the character of the acquired land was assessed and whether the First-tier Tribunal’s evaluative conclusion was open to it.

1. Appeal dismissed. The First-tier Tribunal was entitled to conclude, on the facts found and disregarding the grazing lease, that the paddock was not part of the grounds of the dwelling. Relevant findings included separate registered titles, lack of visibility from the house or gardens, limited access, lack of support for the dwelling and the paddock’s failure to form an integral part of the property.
2. Whether land is part of the grounds is an evaluative exercise involving the balancing of material factors. The First-tier Tribunal had regard to the relevant matters, including access, marketing, historic use, contiguity and the possibility that grounds may be unused. It was entitled to decide the weight given to those factors. The purchasers’ preference not to have acquired the paddock was irrelevant on the facts, but that error did not undermine the conclusion.
3. The approach in Ladson Preston Ltd v HMRC applies beyond multiple-dwellings relief where SDLT treatment depends on the nature of the subject matter of the transaction. Under sections 43(6) and 55 of the Finance Act 2003, the question is the nature of the chargeable interest acquired at completion. The grazing lease did not exist at completion and therefore should not have formed part of the analysis.
4. A post-completion lease is not invariably irrelevant. Later use may be evidence of the land’s character at completion, for example where it formalises an earlier arrangement or reinstates historic commercial use. There was no such evidence here.
5. The Tribunal did not need to determine HMRC’s remaining grounds because the appeal failed on the first issue. Any costs application was to comply with rule 10(5)(a) and (6) of the Tribunal Procedure (Upper Tribunal) Rules 2008.

• Upper Tribunal (Tax and Chancery Chamber): HMRC’s appeal against the First-tier Tribunal’s decision was dismissed. [2024] UKUT 188 (TCC).
• First-tier Tribunal (Tax Chamber): the respondents’ appeal against HMRC’s closure notice was allowed. [2023] UKFTT 450 (TC).