The Commissioners for HMRC v Christopher Brzezicki

Whether land forms part of a dwelling’s “garden or grounds” for Finance Act 2003 purposes is a multifactorial evaluative question. The court must assess all relevant facts at the effective date, including layout, access, title, use, the nature of the land and the character of the property as a whole.

Contiguity is relevant but is not a necessary or determinative condition. Physical separation by a stream, path, fence or similar feature does not automatically exclude land from the grounds where ownership and the overall circumstances support that conclusion. Commercial or alternative use is also only one factor and does not automatically make land non-residential. Later use is relevant only where it evidences the land’s character at completion.

The appeal concerned the stamp duty land tax treatment of a six-acre property acquired on 3 July 2020. The property included a dwelling, a substantial garden, a two-acre parcel known as the island, and a man-made carrier stream separating the island from the garden. The stream contained features facilitating brown trout spawning.

The First-tier Tribunal, by the casting vote of its judge, held that the stream and island were not part of the dwelling’s garden or grounds. It allowed the taxpayer’s appeal against an assessment calculated on the basis that the property was entirely residential: [2024] UKFTT 00845 (TC). The issues before the Upper Tribunal were whether the FTT had misapplied the multifactorial test, wrongly treated contiguity as necessary, and erred concerning transferred fishing rights.

1. Appeal and remaking. HMRC’s appeal was allowed. The FTT decision was set aside and the Upper Tribunal remade the decision, dismissing the taxpayer’s appeal against the SDLT assessment.
2. Applicable test. Under section 116(1)(b) of the Finance Act 2003, “grounds” bears its ordinary meaning: land attached to or surrounding a house, occupied with it and available for the owners’ use. The inquiry is multifactorial and evaluative. Relevant considerations include physical layout, access, title, the nature and use of the land, and the character of the property as a whole.
3. Effective date and use. Land must be characterised at completion. Subsequent use may be considered only insofar as it evidences the land’s character at completion. The FTT therefore erred by treating the stream’s future suitability for commercial fishing activity as relevant where it had found no commercial use at completion.
4. Commercial activity. Commercial or alternative use is not automatically inconsistent with land being grounds. It is one factor to be weighed with all the circumstances. The biological functioning of the stream and its engineered trout-spawning features did not establish a non-residential use inconsistent with its being grounds.
5. Contiguity. Contiguity is relevant but neither essential nor determinative. It concerns adjacency to land under common ownership. A physical division by a narrow stream does not automatically prevent land from forming part of the grounds. The FTT erred in treating the stream as making the island non-contiguous and in giving that separation determinative weight.
6. Application. The island and stream were under unbroken common ownership, accessible by footbridges, proximate and visually connected to the dwelling. No use at completion was inconsistent with their being grounds. The overall impression of the plans and photographs supported that conclusion. The transferred fishing rights benefited land falling within section 116(1)(b), and therefore fell within section 116(1)(c).

• Upper Tribunal (Tax and Chancery Chamber): HMRC’s appeal allowed. The FTT decision, [2024] UKFTT 00845 (TC), was set aside and the decision was remade to dismiss the taxpayer’s appeal.
• First-tier Tribunal (Tax Chamber): The taxpayer’s appeal against HMRC’s SDLT assessment was allowed by the casting vote of the judge.