US Edition
A couple have won a six-figure stamp duty battle with the taxman after arguing a paddock was not part of their residential land.
Taher and Zahra Suterwalla paid £3.6m for a seven-bedroom home with a swimming pool, pavilion, tennis court and paddock outside Henley on Thames in December 2020.
When filing their stamp duty land tax return, the couple declared their property was “mixed-use” – the term for a property with residential and non-residential elements – and calculated they owed £169,500 in tax.
In August 2021, HM Revenue and Customs opened an inquiry into the couple’s tax affairs, which concluded that they should have paid almost twice as much, or an extra £161,250, bringing the total stamp duty bill to £330,750.
Stamp duty rates are considerably lower for properties with non-residential elements such as working agricultural land or a shop. No tax is due on properties worth less than £150,000. After that 2pc is levied between £150,001 and £250,000 and 5pc on the remainder.
By comparison, buyers pay 5pc on residential properties worth between £250,001 and £925,000, 10pc up to £1.5m and 12pc above that.
Mr and Mrs Suterwalla also benefited from a temporary stamp duty break introduced during Covid, which raised the nil-rate band to £500,000.
The couple appealed to the First Tier Tribunal in February 2022. They argued that on the day of the purchase, they had leased the paddock to a neighbour to graze horses, charging £1,000 per year, which meant the property was “mixed use” for tax purposes.
HMRC put forward that the paddock formed part of the garden and grounds and was a key part of the property’s “equestrian” nature.
However the tribunal ruled that the paddock was used for a separate purpose unconnected to the property and so the land had a mixed use.
Explaining his decision, the judge noted that the word “equestrian” had not been used in the sales brochure and there were no stables on the grounds. In addition, the paddock was not visible from the house or gardens and it was also listed separately from the house or gardens on the Land Registry.
HMRC launched an appeal which was dismissed in the upper tribunal last week, bringing the three-year tax dispute to an end. The judges said the evidence presented had not persuaded them to “interfere” with the First Tier Tribunal’s evaluation.
HMRC told the Times it was “carefully considering the judgement”.