And when is a garden not a garden?
Here in the development team we are frequently asked what rates of Stamp Duty Land Tax (SDLT) will apply on a particular transaction.
Should residential or non-residential rates apply?
This particularly comes up in the context of acquisitions of “garden” land, and/or derelict houses. The answer is important because being able to class land as non-residential can result in a huge saving of SDLT.
It has always been difficult to see where the line is drawn between land which has clearly been used as a garden as part of a house – classic “garden grabbing” – and the sale of a plot of land which might be more remote from the house, e.g. a separate paddock. Similarly, how derelict does a house have to be before it is no longer classed as residential?
Hopefully the situation will become clearer following a meeting between the Chartered Institute of Taxation, the Stamp Taxes Practitioner Group and HMRC to discuss such matters. The notes of the meeting include:
- HMRC’s view that the sale of a garden is a residential transaction regardless of whether the garden has been fenced off or not;
- interestingly a subsequent sale of the garden by the buyer may be non-residential (it remains to be seen whether this is clarified later for anti-avoidance);
- the sale of six or more dwellings is non-residential if the sales are provided for in a single or overarching contract, even if completion of the acquisition of each dwelling may take place on different dates;
- a discussion on when construction or adaptation of a building for use as a dwelling has commenced which may also look at external factors such as rating/council tax and planning constraints;
- however HMRC shall no longer take into account whether the property is being marketed as “residential” when deciding on the classification.
Hopefully the meeting will lead to an updating of the HMRC handbook on SDLT to provide clearer guidance on such matters although we will still need to approach each matter on a case by case basis.
If you have any queries on Stamp Duty Land Tax please email me.