HMRC - Stamp duty refunds on uninhabitable properties

10th December 2019 Real Estate Commercial

On 1st April 2016, the government introduced a stamp duty surcharge on additional homes. This introduction requires those purchasing an additional residential property to pay a further 3% on top of the basic stamp duty liability.

The Case

A recent landmark case PN Bewley Ltd v Revenue and Customs Commissioners, 2019, has changed the current position, proving a huge win for developers and landlords alike. The case involved a couple who won an appeal against HMRC, resulting in a ruling thatthey did not have to pay the stamp duty surcharge as the property was not immediately habitable.

The Facts

The property comprised of a bungalow and garden, the previous owner had obtained planning permission to demolish the bungalow and build a replacement. A demolition survey identified asbestos materials in the bungalow and recommended its urgent removal. The survey had involved breaking through walls and floors. The heating system had been removed, albeit, the property was still connected to water, electricity and gas services.

The critical point of contention was whether the property was “suitable for use as a dwelling” at the time of purchase, giving regard tothe definition of a ‘dwelling’ under the Finance Act 2003.

Judgment

The tribunal ruled in favour of PN Bewley, stating that at the time of completion the property had not been in a suitable condition for use as a dwelling. The tribunal went as far as to say that a “passing tramp or group of squatters” would have been unable to live in the property.

This result meant the surcharge did not apply and the property was only liable to be assessed at standard non-residential rates.

Apply for a surcharge refund

It is important to note, when seeking a surcharge refund, that it is the condition of the property at the time of purchase which is pivotal

At present, HMRC has not issued any guidance in respect of any strict conditions that deem a property ‘uninhabitable’ for dwelling purposes, other than the condition taken into consideration in PN Bewley. Currently properties are being reviewed on a case by case basis.  

What is clear, is that those seeking a stamp duty refund must sufficiently evidence the ‘uninhabitable’ condition(s) of the property at completion, this may include: - photographs, surveys, insurance reports, mortgage reports and work quotes etc.

Please note that JMW Solicitors LLP do not provide tax advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax advice. You should consult your own tax advisor before engaging in any transaction.

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Sarah Fielding is a Solicitor located in Manchesterin our Real Estate Commercial department

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