HMRC SDLT: SDLTM00475 – Scope: what is chargeable: land transactions: garden or grounds – legal factors and constraints

Land Transactions: Garden or Grounds – Legal Factors and Constraints

This section of the HMRC internal manual discusses the legal considerations and constraints related to land transactions, specifically focusing on gardens or grounds. It outlines the principles and concepts that determine what is chargeable in such transactions.

• Defines the scope of chargeable land transactions.
• Explains legal factors affecting land transactions involving gardens or grounds.
• Describes constraints that may influence the chargeability of these transactions.
• Provides guidance for HMRC staff on assessing chargeable elements.

Understanding Land Transactions: Garden or Grounds – Legal Factors and Constraints

This guidance was created to help you understand the rules and considerations regarding whether a piece of land can be classified as ‘garden or grounds’ in the context of Stamp Duty Land Tax (SDLT). Below we will explore various legal elements and constraints that impact this classification.

Legal Conditions on Land

When looking at land, there could be legal conditions that either restrict or allow certain uses. These conditions can be found in both public and private law. They are important in determining how the land relates to any buildings on it. It’s often the case that observing how the land is actually used will be more informative than just relying on its theoretical use.

Planning Permissions and Restrictions

One common legal consideration is planning permission. This permission can dictate whether land can be used for non-residential purposes. Here are some key points to consider:

• If you have planning permission for non-residential use, or if the law allows non-residential use, this suggests the land may not be classified as ‘garden or grounds’.
• However, planning law is not the only factor to consider. Often, actual use of the land carries more significance.

For example:

• If planning rules forbid commercial use but the land has been used for commercial purposes for a long time (and it is unlikely that the planning authority will challenge this), it likely indicates that the land is non-residential.
• On the other hand, if the land is allowed for commercial use but is currently being used for residential activities, it is a sign that the land might be classified as residential.

Private Law Considerations

In addition to planning laws, private law factors can also play a role. This includes:

• Lease agreements
• Restrictive covenants (these are limitations that may apply to use of the land)
• Contractual restrictions
• Easements (these allow access to or use of part of another’s land)

Interestingly, whether the property is listed under one title at the land registry or multiple titles is usually not important for this determination.

Access Rights and Geographical Separation

If an owner does not have rights to access a piece of land, it may suggest that the land has a non-residential nature. This is especially true if there are other factors involved, such as geographical separation. However, if there is separation but access is allowed via an easement, that may point to the land being part of the ‘garden or grounds’.

Common Obstacles

Things like pathways for walkers or access for utility providers (e.g., for power lines) will generally not stop the land from being classified as ‘garden or grounds’.

Basic Payment Scheme (BPS) Payments

Receiving payments under the Basic Payment Scheme (BPS) can suggest that the land is used for commercial purposes. However, just because a piece of land receives BPS payments does not automatically mean that it cannot be residential.

Indicators of Non-Residential Land

Several factors can indicate that a piece of land is non-residential. These can include:

• The property has a non-domestic rateable value.
• Non-domestic rates are being collected for the property.
• The property is classified as agricultural land along with buildings for the purpose of being exempt from business rates.

Each of these situations generally points to the idea that the land is being used for non-residential purposes, which may affect how it’s viewed for SDLT.

HMRC Scrutiny

HM Revenue and Customs (HMRC) will pay close attention to any arrangements that seem to have been created merely to alter the SDLT classification between residential and non-residential land. This means that any attempts to manipulate the status may attract HMRC’s interest and scrutiny.

Understanding these factors is essential for correctly determining the status of a piece of land in relation to SDLT. Whether you are buying, selling, or otherwise dealing with land, being aware of these legal factors and constraints can help you navigate the complexities involved with land transactions more effectively.

For more detailed guidance, refer to the official HMRC page, SDLTM00475 – Scope: what is chargeable: land transactions: garden or grounds – legal factors and constraints.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM00475 – Scope: what is chargeable: land transactions: garden or grounds – legal factors and constraints

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