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SDLT: Shafted? No

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When you spend £20m on a property, it’s worth exploring every avenue that might have a prospect of leading to SDLT being charged only at non-residential rates. And, as we have explained before, that requires only that the purchase includes some element (however small) which doesn’t meet the description of ‘dwelling-house’ or ‘garden or grounds’ of one.

In 39 Fitzjohns Avenue Ltd v HMRC [2024] UKFTT 28 (TC) the question before the First-tier Tribunal (FTT) was whether the presence on the eponymous property of a ventilation shaft for a railway tunnel running underneath the property denatured that part of the land as ‘garden or grounds’. Or, to be strictly accurate, whether the character of the land immediately surrounding the ventilation shaft was affected: for the shaft itself was not part of the land purchased but had remained in the ownership of the railway company.

For safety reasons, the area around the shaft (which was itself surrounded by a brick wall some five feet high and covered with a steel mesh and steel girders) was fenced off so as to form what was described as an ‘island’ of about 40 square metres in the grounds. The question was: was the fenced-off area nonetheless part of the grounds of the property?

The question whether a particular piece of land is ‘grounds’ of a property has been described as a multi-factorial one. In this case, the FTT set out no fewer than 16 factors derived from earlier case law: none is determinative, and the weight given to each may depend on the circumstances of the case.

The FTT came down on the side of HMRC: the ‘island’ remained part of the grounds, despite its being inaccessible (or, at least, intended to be inaccessible) to the owners of the property. And size mattered: the area was ‘not particularly large in comparison with the land as a whole and does not affect the ability of the owner of the Property to use the land as a whole as the grounds of the dwelling’.

At first blush, the decision is surprising. Regardless of its size in relation to the rest of the plot, one may baulk at the idea that an area of land which is not only inaccessible but also confers no benefit on you or the property can be regarded as part of your grounds.

At second blush, less so. The lease under which the relevant land was held appears to have contained no covenant or other requirement that the shaft be fenced off, so it would appear that the fencing-off of the land around the shaft, though no doubt prudent, was essentially voluntary. And if it were indeed the case that fencing off a part of the grounds and rendering it inaccessible were sufficient of itself to denature that part as grounds, the opportunities this would create for mitigating SDLT are obvious.

So the FTT’s decision must be the right one. As covered in some of our previous articles on SDLT cases, the courts have previously found that grounds are not denatured simply by dint of being encumbered with a ‘sewage treatment plant’ (Bloom [2023] UKFTT 628 (TC)), poles supporting power cables (Faiers [2023] UKFTT 212 (TC)) or a right of way (Averdieck [2022] UKFTT 374). Now ventilation shafts are added to the list of acceptable inconveniences. 

Issue: 1658
Categories: In brief