Stamp Duty - Residential or Mixed Use Rate?

lmw8586

Hi,
My husband and I are in the process of buying a property. It will be our main/only residence (we've sold our previous home to buy it, so not first time buyers)
The property is a 3 bed house, with about 5 acres of land, 3 stables and a steel framed 'agricultural' building
It is a registered smallholding, though not used commercially by the seller, and we're not planning to use it commercially

Our solicitor has made the assumption with regards to SDLT, by looking at the sales brochure, that it's a mixed use property. I'm really not sure whether we should be paying residential or mixed use rates (my head is saying residential as it's just for our own use?) - and currently the SLDT for mixed use will work out approx £2k more expensive than the equivalent residential rate. I've queried it and the solicitor has told us to speak to our accountant (which we don't have, as we don't have a business, just our own personal finances?!?) - this is a bit frustrating as surely the legal peeps should ultimately be the ones able to confirm?

The Gov UK website states the following
"You pay residential SDLT rates on agricultural land if it’s sold as part of the garden or grounds of a dwelling, for example a cottage with fields."
which backs up my thoughts on residential,. but I'm not sure how the buildings (stables and barn) affect this?

Anyone able to advise, or point me in the right direction to confirm?
Thanks!

allconnected

That’s a tricky one, as the SDLT rate depends on what the property actually is - what it is used for is an indicator of this, but not a deciding factor on its own.

The best way to approach this is to realise that everything is non-residential property UNLESS it falls within one of the three categories of residential property - a dwelling or the gardens and grounds of a dwelling (the third category isn’t relevant here.) If land is agreed to be the gardens and grounds of a dwelling, buildings on that land, which aren’t themselves dwellings, are also residential property.

So - you’re clearly buying a dwelling. But there is a question about whether all of the land you’re buying comprises that dwellings ‘gardens and grounds’.

The test is applied at the moment of sale - how you intend to use it in the future isn’t relevant. So - what’s the nature of the land now? Does the current owner regard this as the grounds of his house, or as something separate - either because it’s used for something else or because it’s simply unused and kept  distinct from the gardens and grounds?  

If the steel framed building is empty and the land around it is unused but the gardens are well kept and maintained, it’s likely that it doesn’t comprise the ‘gardens and grounds’ of the dwelling and hence by default is non-residential. If the steel-framed building is full of his garden equipment and it isn’t possible to distinguish any part of the land from any other part, it may fall within ‘garden and grounds.’

Finally, it’s going to depend on proportions. A 50 bed stately home may well have hundreds  of acres of ‘grounds’ - a two bed bungalow may be pushing it at 2-3  acres. 

So, you’re going to have to show that the land you are buying is, at the point of purchase, the gardens and/or grounds of the house you’re buying. If it is, it’s residential. If it’s not, it’s non-residential.

Finally, take a look at the full HMRC guidance at https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00440 - Gov.Uk is very simplistic and doesn’t really touch on grey areas like this.

lmw8586

That's brilliant, thank you for taking the time to respond - that makes it a lot clearer. The current owner uses the shed for storing equipment etc and the land for grazing their pony - and it's all very well kept and maintained, so in my head it's all part of the gardens and grounds. That's really helpful to know that buildings would be classed as residential property if sited on 'residential' land, I think that's the main bit confusing me and solicitors!
Thanks too for the link - I'll have a good read!