In the case of Anne Dickinson (TC03037, published on 17 November 2013,) the First-tier Tribunal considered the availability of PPR relief on the disposal of part of the grounds of Mrs Dickinson’s main residence.
The property had a large garden and grounds, including tennis courts. Many years previously adjoining farmland had been earmarked for future development and in 1989 a (third party) potential developer included the tennis courts in an outline planning application. The application was approved, and, subsequently, Mrs Dickinson renewed the application every three years to keep it current.
In 2006, Mrs Dickinson learned that automatic renewal was unlikely to be continued, and as she intended to remain in her residence, she decided to develop the land herself. With her husband and two friends, she formed a company, Ilex Developments Limited, to carry out the project.
In December 2006 the land was valued at £300,000, and Ilex agreed, subject to contract, to buy the land. Consideration would be paid as each of the four properties on the site were sold.
On 3 May 2007 the contract was approved by solicitors on behalf of Ilex, and Mrs Dickinson then gave permission for Ilex to start on the groundwork, which it did on 7 June 2007. However, there were some issues regarding the adoption by the local authority of the access road, and having resolved those issues contracts were not formally exchanged until 27 July 2007.
HMRC argued that PPR relief was not available as at the date of disposal (i.e. exchange of contracts on 27 July 2007) because the land was not “land which the owner has for occupation and enjoyment with the residence” (s 222(1)(b) TCGA 1992). The point, of course, was that the diggers had already moved in by then.
However, the tribunal concluded that “garden and grounds” can include land not given over to gardens or other common domestic usage and may change from time to time. However for land to lose its character as “garden or grounds”, the change must be permanent or regarded as permanent. The change cannot be transient or conditional.
Although Ilex entered onto the land to carry out groundworks, if there had been an insurmountable problem with the access, either party was free to walk away from the transaction. The tribunal’s conclusion was that the land had retained its character of “garden or grounds” until contracts were exchanged on 27 July 2007.
What this means
This case illustrates the importance of retaining the status of garden or grounds up to the date of disposal, although it also highlights that the use of the land can change over the period of ownership. Any move away from domestic use with the residence would have to be permanent in order to lose PPR relief.