What Constitutes the ‘Grounds’ of a Large House? Guideline Tax Ruling


Do the ‘grounds’ of a large house extend to areas that are difficult to access and that provide no practical benefit to the property’s owner? The Upper Tribunal (UT) addressed that important issue in the context of a Stamp Duty Land Tax (SDLT) appeal.

The case concerned a country house that, together with a number of outbuildings and 15.5 acres of land, had been purchased for £2.8 million. Approximately two of those acres consisted of ancient, dense and heavily protected woodland, sloping steeply down to a river bank.

The estate’s owner contended that the woodland was not residential in that it did not form part of the property’s grounds, within the meaning of Section 116(1)(b) of the Finance Act 2003. On that basis, it asserted that the property was in mixed use and that SDLT was thus payable at a lower rate.

Had that argument prevailed, the owner’s SDLT liability would have been reduced by more than £200,000. HM Revenue and Customs (HMRC), however, took a contrary view that the whole of the estate, including the woodland, was residential in nature. The owner’s initial challenge to that decision was rejected by the First-tier Tribunal (FTT).

Ruling on the owner’s appeal against that outcome, the UT identified a number of legal and procedural flaws in the FTT’s decision, which was set aside. Rather than remitting the matter for reconsideration by the FTT, however, it elected to remake the decision itself.

Although the woodland was crossed by a public footpath, the owner pointed out that it was otherwise inaccessible from the house, save with the assistance of industrial machinery. The owner could make no greater use of it than any member of the public and it could not be commercially exploited in that it was covered by a tree preservation order. It could not be used for walking, picnicking or other ‘residential’ purposes and it provided no benefit to the owner.

The UT noted that the evaluation it had to perform was inevitably impressionistic and not an exact science. The woodland fell within the legal title of the property and provided some measure of privacy and security to the house, from which it was not inordinately distant. The fact that it was not in agricultural or commercial use was a factor that also weighed in favour of HMRC. Overall, the UT was satisfied that the woodland formed part of the property’s grounds.

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