Nice Try! HMRC challenge stops bid to win stamp duty discount

A legal challenge by HM Revenue and Customs has stopped a bid to secure a stamp duty discount on a property.

The owners of the property claimed that one room in the house was used as a home office and the property’s grounds were in fact paddocks - but these claims were rejected by a First-tier Tribunal hearing the Goodfellow v HMRC case.

The tribunal judged that the claims were “artificial, strained and contrary to common sense.”

Dr Craig Goodfellow and his wife, Julie, bought a property described by the selling agency as a “fantastic family home set in about 4.5 acres in the New Forest, with six bedrooms, gardens, swimming pool, garage, stable yard and paddocks”.

The garage was detached from the house. Above the garage was a room used as a home office and connected to the main property by a covered walkway. The stable yard and paddocks were let to a neighbour for grazing horses for a nominal rent per month.

The original stamp duty return treated the entire acquisition as residential, meaning that rates as high as 15 per cent could have been applied on the purchase. 

However, the Goodfellows subsequently claimed that the office and paddocks were non-residential and that the lower non-residential rates which go up to five per cent applied.

Commenting on the case Andrew Levene, a tax consultant at accountancy firm BKL, says: “The tribunal basically said 'pull the other one' because the room in question was connected to the house, had its own bathroom and could be used as a guest room or a games room. It was no different to someone who uses a spare room or even dining room table as an office.”

The tribunal also dismissed the claim regarding the paddocks, ruling that they clearly formed a part of the house's grounds as there was no evidence of commercial exploitation. Therefore, they were also residential for tax purposes.