Three homeowners have lost their appeal against a decision that sections of land they bought with their homes should be classed as ‘gardens or grounds’ and so be subject to Stamp Duty Land Tax (SDLT) at the full rate.

The issue in each case was whether the land sold with each house was, or formed part of, the “garden or grounds” and was therefore “residential property”, as defined by the Finance Act 2003 for the purposes of SDLT.

The rate of duty chargeable depended on the answer. If the purchased land consisted entirely of residential property, a higher rate applied. If any part of it consisted of, or included land that was not residential, a lower rate applied.

HMRC argued for the higher rate, while the purchasers argued for the lower. The First Tier Tax tribunal found for HMRC, holding that “grounds” had a wide meaning and referred to land that was attached to or surrounding a house, was occupied with the house, and was available to the house-owners for their use.

The purchasers appealed, arguing that land could only form part of a house’s garden or grounds if it was needed for the reasonable enjoyment of the house.

The Upper Tribunal (Tax and Chancery) also found for HMRC.

It held that, contrary to the purchasers’ submission, the words “forms part of” did not mean that land would only be part of a house’s garden or grounds if it were needed for the reasonable enjoyment of the house.

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