Judgment summary
This is an appeal by HMRC against a decision of the First-tier Tribunal (Tax Chamber) in Christopher Brzezicki v HMRC [2024] UKFTT 00845 (TC) (paragraph 1). The case concerned Stamp Duty Land Tax and whether land acquired by Mr Brzezicki on completion of a purchase on 3 July 2020 was entirely residential property, or a mixture of residential and non-residential property, for the purposes of section 116 of the Finance Act 2003 (paragraph 2).
The FTT, sitting as a panel of two, was divided, with the judge's casting vote determining the outcome. The judge held that a carrier stream and a two-acre parcel of land to its west (the 'island') were not part of the garden or grounds of the dwelling, so the property was mixed-use. The Tribunal Member dissented, considering the island and stream formed part of the garden or grounds (paragraph 4).
The Upper Tribunal (Judge Swami Raghavan and Judge Mark Baldwin) allowed HMRC's appeal on all three grounds, set aside the FTT decision, and remade it, dismissing Mr Brzezicki's appeal against HMRC's SDLT assessment (paragraphs 63-87).
Background
Mr Brzezicki completed the purchase of a six-acre property in Hampshire on 3 July 2020, comprising a six-bedroom dwelling (a converted stable block) and a substantial lawned garden to the east of a man-made 'carrier stream', with a two-acre parcel of land (the 'island') to the west, bordered by the River Meon (paragraphs 3, 15).
The carrier stream contained engineered features, including a sluice, waterfall, gravel spawning bed, ranunculi plant growth, and grille housings, designed to function as a spawning ground for wild brown trout. Two small footbridges connected the island to the garden (paragraphs 16, 13(3)-(4)).
The FTT found that at completion the stream was 'not being run on a commercial basis' but was operating biologically to produce brown trout, and that Mr Brzezicki began promoting a fly-fishing business shortly after completion (paragraphs 17, 75, 79). HMRC assessed the property as entirely residential; Mr Brzezicki appealed, arguing it was mixed-use, and the FTT allowed his appeal by the judge's casting vote (paragraph 4).
Core dispute
The dispute centred on whether the carrier stream and the two-acre island formed part of the 'garden or grounds' of the dwelling under section 116(1)(b) Finance Act 2003, such that the whole property was 'residential property', or whether they constituted non-residential land, making the property mixed-use for SDLT rate purposes (paragraphs 2, 8-9).
HMRC's grounds of appeal were: first, that the FTT took into account irrelevant factors in applying the multifactorial test for 'grounds', namely characterising the stream as a 'factory' or 'plant', relying on incidental benefit to an unconnected fishery business, and treating separation by the stream as significant; second, that the FTT erred by treating contiguity as a necessary condition for land to form part of the garden or grounds, rather than one factor among many; and third, that the FTT erred in its approach to section 116(1)(c) regarding fishing rights, because that conclusion depended on the island not being grounds (paragraphs 5, 26).
Court findings
The Upper Tribunal agreed with HMRC on Ground 1, holding that the FTT had wrongly taken into account the future suitability of the land for commercial use (there being no finding of commercial use at completion), and had wrongly equated physical separation by the stream with a lack of contiguity, when the land was in common ownership (paragraphs 30-53).
The Tribunal held that commercial use of land, even if established, would not automatically prevent land from being characterised as grounds, citing Harjono and Faiers (paragraphs 43-45).
On Ground 2, the Tribunal held that the FTT erred in treating contiguity as a necessary condition, contrary to the multifactorial approach established in Hyman UT, Hyman CA and How, and that this was not supported by authority (paragraphs 54-59).
On Ground 3, the Tribunal held that the FTT's conclusion that fishing rights fell outside section 116(1)(c) depended on the premise that the island was not grounds, a premise which could not stand once Grounds 1 and 2 were upheld (paragraphs 60-62).
The Tribunal found these errors were material to the FTT's conclusion, as illustrated by the Tribunal Member's dissent reaching the opposite result (paragraph 64). The Tribunal set aside the FTT decision and chose to remake it rather than remit, given the FTT's undisputed primary findings of fact (paragraph 65).
Remaking the decision, the Upper Tribunal found that the island and carrier stream were sufficiently connected to the dwelling, under common ownership and contiguous, accessible via footbridges, and that there was no usage at the effective date inconsistent with them being grounds. It concluded that the carrier stream and island were part of the grounds of the dwelling, so the property was entirely 'residential property' for SDLT purposes (paragraphs 68-83).
Outcome
HMRC's appeal against the FTT Decision was allowed on all three grounds. The Upper Tribunal set aside the FTT Decision and remade it, dismissing Mr Brzezicki's appeal against HMRC's SDLT assessment, on the basis that the property comprised entirely residential property, so that the SDLT rates in Table A (rather than the mixed-use rates in Table B) applied (paragraphs 83, 85-87).
Major issues / areas of contention
- Whether the two-acre 'island' and carrier stream formed part of the garden or grounds of the dwelling under section 116(1)(b) Finance Act 2003.
- Whether the FTT erred by taking into account the future suitability of the carrier stream for commercial trout-breeding as a factor against classification as grounds.
- Whether incidental benefit to a neighbouring, unconnected fishery business was a relevant factor in characterising the land.
- Whether physical separation by a man-made stream rendered the island 'not contiguous' with the dwelling despite common ownership.
- Whether contiguity is a necessary condition for land to constitute 'garden or grounds', or merely one factor in a multifactorial test.
- Whether fishing rights transferred with the property subsisted for the benefit of the dwelling or its grounds under section 116(1)(c).