When is agricultural land not agricultural land?

In the case of S and J Holding v HMRC [2024] UKFTT 337 (TC), which came before the First Tier Tribunal in April 2024, a taxpayer claimed the lower rate on a property which comprises, in the words of the sales literature, “an impressive and beautifully presented five-bedroom Georgian country house with two-bedroom cottage, staff flat and extensive equestrian facilities, all nestled in approximately 40.6 acres.”

The taxpayer claimed that 24.7 acres of the land should be considered agricultural, citing an environmental report which described it as such, the fact that one of the fields was only used for the growing of forage and the sheer size of the holding.

None of these factors were held to be conclusive. The tribunal also looked at the minimal level of agricultural activity (by both the current and previous owners), the fact that the entity was held on a single land registry title and, crucially, the meaning of “grounds” in the context of the property.

The case was decided in favour of HMRC, in the words of the Chairman’s summing up:

“…the Fields are substantial, comprising some 24 acres. That is more than half the acreage of the Property. It is certainly a factor in favour of the appellants’ case. However, the Farmhouse is a substantial property. It is not unusual for a substantial country property to have grounds extending to many acres. Nor is it unusual that part of the grounds of a substantial property cannot be seen from the dwelling, which is the case with part of the Fields, including Field 11…there was more land than the appellants needed to keep their horses and other animals…but that relates to the appellant’s use of the Property after 29 August 2018. The question is whether the Fields added any amenity or benefit to the Farmhouse at that time, or whether they performed a function in relation to the Farmhouse as a dwelling, such that they could properly be described as part of the grounds of the Farmhouse. Taking all the evidence into account, on balance I have come to the conclusion that the Fields, including Field 11, did provide amenity and benefit to the Farmhouse and as such performed a function in relation to the Farmhouse as a dwelling. I am satisfied that the Fields formed part of the grounds of the Farmhouse at the time of the transaction.”

Whilst the case turns solely on SDLT, one wonders whether the principles involved might at some stage be extended towards APR. It is also worth noting the importance of how the property was described in the marketing literature (a similar approach was taken in the Arnander case in 2006).