Stamp duty land tax: no limitation concerning definition of residential property

There is no test for stamp duty land tax (SDLT) payable on the acquisition of residential property limiting it to the garden or grounds needed for the reasonable enjoyment of the dwelling, the Court of Appeal has confirmed in Hyman and others v Commissioners of HM Revenue and Customs [2022] EWCA Civ 185; [2022] PLSCS 33. SDLT is chargeable on land transactions under the Finance Act 2003. Any acquisition of a chargeable interest – an estate, interest, right or power in or over land – is a land transaction. A higher rate is chargeable where the land consists entirely of residential property than where the land is or includes land which is not residential property. Under section 116 of the Act, residential property means a building that is used or is suitable for use as a dwelling together with land that forms part of the garden or grounds of such a building. Non-residential property is any property that is not residential property. The case concerned two properties. The first, a farmhouse near St Albans in Hertfordshire, comprised a house and 3.5 acres of land. The house was set within a cultivated garden and the remainder of the land was a meadow with a large barn in need of repair. The second property, in Fordingbridge, Hampshire, comprised a house and 4.5 acres of land which included a garden, swimming pool, garaging, stable yard and paddocks. The taxpayers argued for a workmanlike and coherent test for establishing what is residential property, and that for the garden or grounds to count as residential property they must be needed for the reasonable enjoyment of the dwelling having regard to its size and nature. In both cases, the extent of the garden or grounds exceeded that test, and so it was argued that each taxpayer was only liable for SDLT at the lower of the two rates, a difference of £34,950 and £48,500 respectively. They relied upon HMRC statements of practice in relation to analogous legislation concerning stamp duty relief in disadvantaged areas, which they argued should be taken into account in interpreting section 116. Guidance there stated that the land will include that which is needed for the reasonable enjoyment of the dwelling having regard to the size and nature of the dwelling. The Court of Appeal rejected the submissions, upholding the decisions of the First-tier Tribunal and Upper Tribunal (Lands Chamber). External aids to interpretation can be helpful in disclosing background and context to assist the court in ascertaining the meaning of a statute, but they do not displace the meanings conveyed by the words of a statute that are clear, unambiguous and do not produce absurdity: R (on the application of O) v Secretary of State for the Home Department [2022] UKSC 3. There was no reason that parliament should have intended guidance given in relation to stamp duty to be applied in relation to SDLT, an entirely new tax invented to replace it. The words of section 116 – “together with land that forms part of the garden or grounds of such a building” are clear and unambiguous and do not produce absurdity. Louise Clark is a property law consultant and mediator