A first-tier tax tribunal has dismissed an appeal by property owner Mike Lazaridis, upholding HMRC's decision to charge him an additional £1.2 million in Stamp Duty Land Tax (SDLT).
The ruling hinged on whether 40 acres of fields within Lazaridis' estate constituted “residential property” or could be considered “mixed-use” for SDLT purposes. This decision has far-reaching implications for property owners with substantial grounds, particularly those leasing out sections for agricultural use.
The Case
The dispute centres on a 106-acre estate Lazaridis purchased in 2022 for £10.75 million in Hertfordshire. The property includes a main residence, outbuildings, and extensive fields. Since 2016, these 40 acres of fields have been under annual "mowing licences" with AT Bone and Sons, an agricultural company that cut hay or "haylage" once or twice yearly.
Lazaridis argued that this agricultural activity constituted a "commercial purpose," thereby qualifying the property as mixed-use, which would entitle him to a significantly lower SDLT rate.
The tribunal’s interpretation of the fields’ role was critical, as SDLT law defines "residential property" to include any land considered “grounds” of the main dwelling. Lazaridis had filed his SDLT return under the assumption of mixed-use classification, leading to HMRC's review and reclassification as residential.
Key Arguments and Tribunal Ruling
Represented by Sean Randall, Lazaridis argued that the mowing arrangement separated the fields’ use from the dwelling, making them functionally independent of the residence. The fields were used to grow and cut grass for AT Bone’s haylage business, an arrangement aimed at profit, and, according to Randall, detached from any residential purpose.
However, HMRC, represented by Leah Fairhurst, contended that the mowing was secondary to the primary residential nature of the property, with the main benefits to the landowner being aesthetic and practical. They noted that the mowing arrangement allowed the fields to remain weed-free and well-maintained, indirectly supporting the character and privacy of the main residence.
The tribunal concluded that while the mowing activity technically involved commercial benefits for the agricultural company, its purpose aligned with maintaining the estate as a residential area. The tribunal ruled that the property’s description in marketing materials as a "parkland estate" further solidified the residential classification.
Legal Implications
This decision reaffirms HMRC's strict interpretation of what constitutes "grounds" associated with a residence, effectively broadening the scope of residential property under SDLT law. While the land was leased for commercial hay production, the tribunal highlighted that the primary benefit of the fields to Lazaridis was maintaining the land, thus tying it to the residence.
This ruling may affect property owners with mixed-use claims in future SDLT assessments. The judgment referenced previous cases, stressing that each case’s unique circumstances must be considered. However, the tribunal was clear: properties classified as “residential” by their essential nature, even with periodic agricultural use, could face heightened tax assessments.
This case highlights the need for precision in SDLT classifications and the potential pitfalls of assuming mixed-use status based on minor commercial activities. For taxpayers like Lazaridis, this judgment is a costly reminder of HMRC’s exacting standards on SDLT liabilities for high-value residential estates.