What are SDLT Grazing Rights?

Hillier Hopkins LLP

Chartered Accountants & Tax Advisers

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A cautionary tale for how it can go so wrong.

Pensfold, a Cayman company, purchased Pensfold Farm for £2.825m. The purchase included a large property and 27 acres of land. Pensfold’s SDLT liability totalled £130,750 on the basis the purchase was non-residential as it was a farm.

Pensfold planned to develop the farm into an eco/agritourist business by adding a tennis court, changing facilities, new lake, alpacas, sheep, pigs, cattle, ponies, turkeys and an entertainment barn.

HMRC challenged the non-residential classification and sought an additional £206,750 towards the company’s SDLT bill.

Pensfold claimed non-residential status as the previous owners had a grazing agreement with a neighbouring farm. Statements were given to the courts which confirmed that the land was grazed from April to October every year.

HMRC won at the First Tier Tribunal because the company’s paperwork was not in order. The grazing agreement was not agreed formally and there was no mention of the grazing rights in the sales brochure or the contract for sale. In addition, Pensfold were unlikely to continue with the grazing as this would have conflicted with their intention of developing rare breeds on the land.

What can we take away?

Pensfold should be used as a cautionary tale for purchasers and solicitors to make sure the paperwork is in place at completion as a simple oversight can be very costly.

If you have any concerns please contact Natasha Heron on natasha.heron@hhllp.co.uk or +44(0)192 363 4460.


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