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Case law on the meaning of grounds
Case law on the meaning of grounds
In the Decision, the FTT cited and relied on a number of decisions of other tribunals and courts on the issue of mixed residential and non-residential properties. It is not necessary to reproduce all of the authorities mentioned in the Decision, but it is useful to set out here some of the passages cited and relied on by the FTT.
The UT in Hyman & Ors v HMRC [2021] UKUT 68 (TCC) (‘Hyman UT’) observed at [33]:
“Section 116(1)(b) refers to a garden or grounds ‘of’ a dwelling. The word ‘of’ shows that there must be a connection between the garden or grounds and the dwelling. The section does not spell out what criteria are to be applied for the purpose of establishing the necessary connection.”
The UT held at [38] that:
“… there is no wording in section 116(1)(b) which imposes, or even hints at, a requirement that land can only be a garden or grounds of a dwelling if the land is needed for the reasonable enjoyment of the dwelling. We consider that in the absence of any wording to give effect to the limitation contended for, there is no such limitation on the operation of the provision.”
At [49], the UT provided the following guidance:
“Given that ‘garden’ or ‘grounds’ are ordinary English words which have to be applied to different sets of facts, an approach which involves identifying the relevant factors or considerations and balancing them when they do not all point in the same direction is an entirely conventional way of carrying out the evaluation which is called for.”
The Court of Appeal endorsed the views of the UT in Hyman and Goodfellow v HMRC [2022] EWCA Civ 185 (‘Hyman CA’) at [33].
The UT in The How Development 1 Ltd v HMRC [2023] UKUT 84 (TCC) (‘How Development’) held, in [46] – [47] that accessibility is a factor to be taken into account by the FTT in its evaluative exercise, but difficulty of access or inability to access an area does not mean that the land cannot be part of the grounds of the dwelling. The UT said, at [116], that they had adopted the approach suggested in Hyman UT and endorsed by the Court of Appeal in Hyman CA of weighing up all material factors, based on the FTT’s relevant findings of fact in that case. Having set out the different factors, the UT set out some guidance in [123]:
“In considering this question, it is important not to divorce from its context the reference by Judge McKeever in Hyman FTT to land ‘being available to the owners to use as they wish’ … The judge was there explaining what she meant by grounds being land which is ‘occupied by the house’, and formed part of her statement, with which we agree, that use need not be active, and nor was it necessary for grounds to be used for ornamental or recreational purposes. Importantly, in that passage Judge McKeever went on to state that it was not fatal that other people might have rights over the land and that ‘a right of way over grounds might impinge on the owners’ enjoyment of the grounds and even impose burdensome obligations on them, but such rights do not make the grounds any the less the grounds of that person’s residence’. Again, we endorse that statement. This approach is in our view consistent with the conclusion in Hyman that it is not necessary for garden or grounds to be needed for the reasonable enjoyment of a dwelling. Since binding authority now establishes that ‘grounds’ are not confined to land necessary for the reasonable enjoyment of a dwelling, it is in our view consistent that third parties may have rights over the grounds or use the grounds, for example under planning or environmental law, without them ceasing to be grounds of the dwelling. Whether or not the land is used for a commercial purpose, which is clearly a relevant factor, is a separate question.”
As will be seen below, the FTT adopted the nine ‘pointers’ listed by Judge Baldwin in James Faiers v HMRC [2023] UKFTT 00297 (TC) (‘Faiers’) to be considered when considering whether land forms part of the grounds of a building. Although Judge Baldwin’s formulation is helpful, we prefer the expanded summary of the relevant factors, derived from the cases including Hyman, Faiers and How Development, by Judge McKeever in 39 Fitzjohns Avenue Ltd v HMRC [2024] UKFTT 28 (TC) at [37]:
Grounds is an ordinary English word.
HMRC’s SDLT manual is a fair and balanced starting point (considering historic and future use, layout, proximity to the dwelling, extent, and legal factors/constraints).
Each case must be considered separately in the light of its own factors and the weight which should be attached to those factors in the particular case.
There must be a connection between the garden or grounds and the dwelling.
Common ownership is a necessary condition, but not a sufficient one.
Contiguity is important, grounds should be adjacent to or surround the dwelling.
It is not necessary that the garden or grounds be needed for ‘reasonable enjoyment’ of the dwelling having regard to its size and nature.
Land will not form part of the ‘grounds’ of a dwelling if it is used or occupied for a purpose separate from and unconnected with the dwelling.
Other people having rights over the land does not necessarily stop the land constituting grounds. This is so even where the rights of others impinge on the owners’ enjoyment of the grounds and even where those rights impose burdensome obligations on the owner.
Some level of intrusion onto (or alternative use of) an area of land will be tolerated before the land in question no longer forms part of the grounds of a dwelling. There is a spectrum of intrusion/use ranging from rights of way (still generally grounds) to the use of a large tract of land, historically in separate ownership used by a third party for agricultural purposes under legal rights to do so (not generally grounds).
Accessibility is a relevant factor, but it is not necessary that the land be accessible from the dwelling. Land can be inaccessible and there is no requirement for land to be easily traversable or walkable.
Privacy and security are relevant factors.
The completion of the initial return by the solicitor on the basis the transaction was for residential property is irrelevant.
The land may perform a passive as well as an active function and still remain grounds.
A right of way may impinge an owner’s enjoyment of the grounds or even impose burdensome obligations, but such rights do not make the grounds any less the grounds of that person’s residence.
Land does not cease to be residential property, merely because the occupier of a dwelling could do without it.”