Judgment summary
The Appellants, Mr Matthew Lambourne and Mrs Sarah Lambourne, purchased a house and surrounding land in East Sussex (the "Property") on 12 April 2023 for £1,010,000, plus £850 for contents (2). They submitted an SDLT return on the same day showing £42,250 payable, then applied on 5 July 2023 to amend the return to claim Multiple Dwellings Relief ("MDR"), receiving a refund of £16,750 (2).
HMRC opened an enquiry and issued a closure notice on 27 May 2024 concluding MDR was not available and that the £16,750 plus interest was repayable (3). The dispute centred on a unit on the site (the "Unit"), variously described as an annex, caravan or mobile home, and whether it formed part of the land for MDR purposes (4)-(5).
The Tribunal held that MDR was not available because the Unit did not constitute land, but accepted that part of the purchase price related to the Unit, meaning the SDLT due would need adjustment to remove the Unit's value from the chargeable consideration (7, 103).
Background
The Property consists of a detached five-bedroom country house, open spaces, and a detached double garage (5). The Unit is a flat-roofed metal structure with glass windows and doors, containing a bedroom, a living/dining room with kitchen facilities, and a bathroom (17)-(18). It rests on concrete pillars and is connected to utilities, described by Mr Lambourne as 'properly plumbed in' (19)-(20).
An undated hand-drawn plan by previous owners was annotated 'TEMP SUPPLIES TO MOBILE. ELECTRICITY + WATER' (16(4)). Planning permission dated 19 July 2002 permitted, among other things, a 'residential caravan' (75).
HMRC's closure notice and a review conclusion letter dated 4 July 2024 had described the Unit as 'not moveable' (28). During litigation, HMRC's primary argument shifted to contend the Unit was a chattel because it could be removed intact, which had not been raised during the enquiry (27)-(28).
Core dispute
The fundamental issue was whether the Appellants were entitled to MDR in relation to the Unit, which raised two questions: whether the Unit was a 'chattel' or part of the land and so a 'chargeable interest' under Schedule 6B paragraphs 2(5) and section 48(1) Finance Act 2003, and whether the Unit was suitable for use as a single dwelling under Schedule 6B paragraph 7(2) Finance Act 2003 (9).
A procedural question also arose as to whether HMRC could introduce the chattel versus land argument during the litigation, given it had not featured in the enquiry or closure notice (11), (27)-(28).
The Appellants argued the Unit was part of the land, pointing to planning permission, the difficulty of removal without damaging trees around the Unit, and sufficient privacy between the house and Unit (12). HMRC argued the Unit was a chattel that could be removed with appropriate equipment without significant damage, that the planning permission was only for a caravan, and that, if the Unit were part of the land, it lacked sufficient privacy to be suitable for use as a single dwelling (13).
Court findings
On the procedural issue, the Tribunal applied Clark v Revenue and Customs Commissioners [2020] EWCA Civ 204 and the Fidex principles, finding that the conclusion of the closure notice was rejection of the MDR amendment, which necessarily entailed HMRC's assertions that the Unit was not part of the land and was not suitable for occupation as a single dwelling. The Tribunal held these issues were within the scope of the appeal, and that in any event HMRC could raise new arguments provided fairness requirements were met, which they were given the statement of case was filed over a year before the hearing (33)-(35).
On the chattel versus land question, the Tribunal applied the test from Royal Parks Ltd v Bluebird Boats Ltd [2021] EWHC 2278 (TCC) at [77], considering degree of annexation and purpose of annexation, drawing on Hellawell v Eastwood, Holland v Hodgson, Elitestone v Morris, Chelsea Yacht & Boat Company Ltd v Justin Pope and Wessex Reserve Forces and Cadets Association v White (37)-(47).
The Tribunal found that the Unit rested on concrete pillars with utility connections, and considered removal at both the time of installation and the effective date of the transaction. It found the Unit could likely have been removed without injury to the land or significant damage to itself, using appropriate equipment, and was not dependent for its structural integrity on remaining in place (61)-(64), (71). The Tribunal found the planning permission suggestive of permanence but gave it limited weight absent detailed planning law submissions (78)-(79), and concluded the Unit was, in its nature, a mobile home not indicative of permanence as part of the land (82)-(83).
The Tribunal concluded that the Unit was a chattel, being unpersuaded on the balance of probabilities that objective evidence showed an intention for the Unit to form part of the land, or that its annexation was for the permanent and substantial improvement of the land (84).
On suitability for use as a single dwelling, applying Fiander and Brower v HMRC [2021] UKUT 0156 and Winfield v Revenue and Customs Commissioners [2024] UKFTT 734 (TC), the Tribunal found that, had the point arisen, the Unit would have been suitable for use as a single dwelling, since any lack of privacy between the house and Unit did not undermine suitability (100)-(102). However, since the Unit was found to be a chattel and not a chargeable interest, this question did not ultimately arise (102).
Outcome
The Tribunal held that MDR was not available because the Unit did not constitute land, and was instead a chattel (7), (84), (103). It accepted, however, that the purchase price for the Property included payment for the Unit, so the SDLT due required adjustment to remove the value of the Unit from the chargeable consideration (7), (85), (103).
The Tribunal directed the parties to seek to agree the value of the Unit for SDLT purposes, with liberty to apply to the Tribunal if agreement could not be reached (103). The Tribunal noted there had been no suggestion, nor did the decision reflect, that the Appellants had acted improperly, having made the MDR claim in a genuine belief that it would apply (8).
Major issues / areas of contention
- Whether the Unit constituted a 'chargeable interest' as part of the land, or was a chattel, for the purposes of Schedule 6B paragraphs 2(5) and section 48(1) Finance Act 2003.
- Whether the Unit was suitable for use as a single dwelling under Schedule 6B paragraph 7(2) Finance Act 2003.
- Whether HMRC was entitled to raise the chattel versus land argument during litigation when it had not been part of the enquiry or closure notice.
- How the burden of proof applied depending on whether the Unit rested on its own weight or was attached to the land by other means.
- How much of the purchase price for the Property related to the Unit, and the consequential adjustment to the chargeable consideration for SDLT.