Can an overgrown plot with a derelict garage be treated as non-residential for SDLT?

Introduction

Buyers sometimes discover, after completing a purchase, that part of what they acquired may not have been residential property for Stamp Duty Land Tax purposes. A common example is a neglected parcel of land attached to a house, especially where that land was overgrown, inaccessible or contained a derelict structure.

The key legal question is whether that land was truly part of the “garden or grounds” of the dwelling at the effective date of the transaction. If it was not, the transaction may have been non-residential or mixed-use, which can affect the SDLT rate and may justify an amendment or repayment claim.

This issue now needs to be approached with care. The courts have repeatedly said that “garden or grounds” is a factual, multi-factorial question. In addition, where the argument is that land or a building was uninhabitable or not suitable for use as a dwelling, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A purchaser acquired a dwelling together with a small adjoining plot. That additional plot was said to be in a neglected state at the time of purchase. It was heavily overgrown, difficult to access, and contained a derelict garage. The purchaser wanted to know whether there was a good argument that this plot was not part of the dwelling’s garden or grounds, so that the acquisition should have been treated as non-residential for SDLT purposes rather than wholly residential.

A related practical question was what evidence would be needed if HMRC later opened an enquiry, especially where the purchaser had photographs but no formal survey obtained at the time of purchase.

Nick’s Explanation

Nick’s reasoning was that the strongest argument focused on the factual character of the land at the date of purchase. In anonymised form, his view was that the plot could be argued not to be part of the grounds of the house because it was “unused and neglected” and had ceased to serve any meaningful residential function.

He identified the main points as follows:

• SDLT depends on whether the land acquired was entirely residential or included non-residential land.
• The question is not answered by title alone. Common ownership is relevant, but not enough by itself.
• The courts apply a multi-factorial assessment to decide whether land forms part of a dwelling’s garden or grounds.
• Relevant factors include the land’s physical character, its use, its relationship to the dwelling, and whether it provides any active or passive residential benefit such as amenity, privacy or security.
• An overgrown and derelict plot may support an argument that the land had become functionally disconnected from the dwelling.

Nick also took the practical view that, if HMRC ever enquired, photographic evidence would likely be important. A surveyor’s report and statements could help, but in a modest repayment case they might not always be essential if the photographs clearly showed the condition of the land at the relevant time.

He also noted that an SDLT return can be amended within the statutory time limit under Schedule 10 to the Finance Act 2003, and that a repayment can be sought if the original return overstated the tax.

The Law

The starting point is the Finance Act 2003.

• Section 55 FA 2003 governs the amount of SDLT payable.
• Section 116(1) FA 2003 defines “residential property”.
• Under section 116(1)(a), residential property includes a building used or suitable for use as a dwelling, or in the process of being constructed or adapted for such use.
• Under section 116(1)(b), it also includes land that is or forms part of the garden or grounds of such a building.
• Under section 116(1)(c), it includes interests or rights over land that subsist for the benefit of the dwelling or its garden or grounds.

If land does not fall within that definition, it is non-residential property.

The main authorities on “garden or grounds” establish that these are ordinary English words and that the answer depends on a broad factual evaluation rather than a single legal test.

The important points from the cases include:

• Hyman & Goodfellow v HMRC [2022] EWCA Civ 185 confirms that the assessment is multi-factorial.
• There must be a real connection between the land and the dwelling.
• There is no separate “reasonable enjoyment” test.
• Land may still be grounds even if it is not actively used and even if it is wild or difficult to access.
• Passive functions such as privacy and security can still point towards land being grounds.
• Common ownership is necessary but not sufficient.
• Land used for a purpose separate from and unconnected with the dwelling may fall outside the grounds of the dwelling.

Where a taxpayer argues that property was uninhabitable or not suitable for use as a dwelling, that is a different but related line of argument under section 116(1)(a). That argument is now harder to establish. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition thresholds are relatively high. Serious disrepair, neglect or the need for works will not automatically mean a building is not suitable for use as a dwelling.

For amendments, Schedule 10 FA 2003 is relevant. Paragraph 6 allows amendment of an SDLT return within the statutory time limit, and repayment consequences follow if the original return overstated the tax.

Analysis

The correct analysis is to ask whether, at the effective date of the transaction, the disputed plot really formed part of the garden or grounds of the house.

That requires a step-by-step review of the facts.

1. Start with the physical nature of the land.

   If the plot was heavily overgrown, difficult to enter, and contained a derelict garage, those facts may support the argument that it no longer had the character of ordinary residential garden land.

2. Consider the functional connection with the dwelling.

   The question is not simply whether the land sat behind or beside the house on the title plan. The question is whether it was functionally part of the dwelling’s domestic setting. If it had ceased to provide usable amenity, recreation, privacy, security or any other domestic benefit, that weakens HMRC’s argument that it remained grounds.

3. Consider whether the land had any active or passive residential use.

   Land does not need to be landscaped or regularly used to be grounds. The case law is clear about that. So overgrowth alone is not enough. The stronger point is where the land’s condition shows abandonment or severance from normal residential use.

4. Consider whether there was any separate or disconnected character.

   Even if the plot was not commercially exploited, a taxpayer may argue that it was effectively unconnected with the dwelling because of its condition and lack of residential utility. That said, this is not an easy argument. HMRC may respond that many neglected areas still remain part of a property’s grounds.

5. Assess the size and setting.

   A small plot may sometimes be easier to characterise as ordinary garden land, especially if it adjoins the dwelling directly. On the other hand, if it is physically distinct, obstructed, or occupied by a ruinous structure, those features may help the taxpayer.

6. Keep separate any “unsuitable for use as a dwelling” argument.

   If the focus is on the land and not the house itself, the main issue is section 116(1)(b), not whether the dwelling was habitable under section 116(1)(a). If anyone does try to argue that the dwelling itself was unsuitable for use, they must recognise that the threshold is now relatively high after Mudan.

Overall, the argument described here is arguable, but it is fact-sensitive. The most difficult point for the taxpayer is that the courts have accepted that land can still be grounds even when it is wild, inaccessible or not actively used. So success is more likely where the evidence shows not just neglect, but a genuine loss of residential character and connection.

Outcome

A neglected plot with a derelict garage is not automatically non-residential for SDLT. However, there may be a credible argument if the facts show that, at the date of purchase, the land had ceased to function as part of the house’s garden or grounds.

The strength of the case will usually depend on evidence showing:

• the plot’s physical condition at the time of purchase;
• the absence of any real residential use or benefit;
• the lack of meaningful connection between the plot and the enjoyment of the dwelling; and
• why the land’s condition was more than ordinary neglect or wild growth.

If those points are made out, an SDLT amendment or repayment claim may be worth considering, provided it is brought within the statutory time limits.

Practical Steps

If you are assessing a similar SDLT position, the following steps are sensible:

1. Review the title documents, transfer and contract to identify exactly what land was acquired.
2. Gather photographs showing the state of the land at or near completion. Metadata may help if the images are not visibly date-stamped.
3. Collect any contemporaneous material such as sales particulars, survey notes, solicitor correspondence, planning papers or demolition plans.
4. Prepare a clear factual timeline explaining the condition, accessibility and use of the land at the effective date of the transaction.
5. Consider whether a surveyor or other professional can provide retrospective evidence on condition, if the facts are disputed.
6. Keep the legal analysis focused on section 116(1)(b) if the issue is whether land was part of the garden or grounds.
7. If the transaction is still within the amendment window, check whether an amendment under Schedule 10 FA 2003 is available.
8. If HMRC opens an enquiry, be ready to support the claim with facts rather than broad assertions.

Anyone considering an argument based on uninhabitability should be especially careful. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition threshold is relatively high, so ordinary disrepair or intended renovation will often not be enough.

Conclusion

The SDLT treatment of a neglected plot attached to a house depends on whether it was truly part of the dwelling’s garden or grounds at the time of purchase. Overgrowth and dereliction may help a taxpayer, but they do not decide the case on their own. The courts look at the whole picture, including character, use, accessibility, privacy, security and functional connection to the dwelling. Good factual evidence is usually the key to whether a reclaim has real prospects.

Legal References Used

• Finance Act 2003, section 55
• Finance Act 2003, section 116(1)
• Finance Act 2003, Schedule 10, paragraph 6
• Finance Act 2003, Schedule 6A, paragraph 7(1)
• Hyman & Goodfellow v HMRC [2022] EWCA Civ 185
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799
• Suterwalla
• How Development

This page was last updated on 22 March 2026.

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