17 June 2022

SDLT Refund for Uninhabitable Property Purchases

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When buying a second residential property as an individual or any residential property as a company, you are liable to pay an extra 3% stamp duty land tax.

However, there is the possibility that a property purchaser may not need to pay this if certain exemptions apply.

Too derelict to be a dwelling?

One exemption applies when you are buying a residential property that is classed as ‘no longer habitable as a dwelling’. HMRC specifically mention ‘dereliction’ as a keyword and makes it clear that there is a difference between a derelict property and a property which is simply in need of repair.

There are a small minority of buildings that are derelict enough to be considered uninhabitable and therefore no longer classed as a dwelling. The case of Bewley v HMRC (2019) has recently resulted in favour of the purchasers in question. Mr Bewley had purchased a bungalow and a plot of land through a company. The purchasers sent off a tax return on the basis that the residential property had no boiler, no heating and asbestos all around the property. Mr and Mrs Bewley, therefore, demolished the property and built a new home. The bungalow benefitted from planning permission for the demolition of the existing dwelling and replacement with a new dwelling.

The purchasers argued that the property was not a ‘dwelling’ and produced evidence to show that it was in a derelict state and therefore, not suitable for residential purposes. The Tribunal found that in fact the building was not suitable to be used as a dwelling and it was not used as a dwelling at the time of the purchase and so, was classed as a non-residential property.

Consequently, the test for the higher 3% rates of SDLT is whether the building is used as or is suitable for use as a residential property at the point of purchase. If the property is not suitable for residential purposes, the higher rates of SDLT cannot apply.

If you have recently purchased a property and wish to make a claim for a refund on SDLT, please contact our specialist team on 0203 9098 399.

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