Have you overpaid Stamp Duty Land Tax (SDLT)?

​If you have paid the additional Stamp Duty Land Tax (SDLT) on the purchase of a dilapidated property you could be due a refund from HMRC.
 
The government introduced SDLT surcharges on 1st April 2016 for individuals purchasing a second residential property, or when a residential property is purchased by a limited company.
 
These measures were supposed to discourage individuals from purchasing additional residential properties and support the housing market; however tribunal decision in the case of P N Bewley Ltd V HMRC [2019] established that an SDLT surcharge is not payable where a property is not habitable at the time of purchase.  
 
Here is our quick and easy summary of the case; however, you can read the full tribunal decision here.

• The appellant company (P N Bewley Ltd) had purchased a bungalow which was in a poor and inhabitable condition for a consideration of £200,000. They filled an SDLT return and paid £1,500 applying the residential rates (Table A, FA 2003, s. 55(1B).

• HMRC opened an enquiry into the SDLT return; and as a result, the tax payable was revised to £7,500 on the grounds that the transaction was subject to additional rates (FA 2003, Sch. 4ZA, para. 4) due to a non-individual (company) purchasing a major interest in a single dwelling (satisfying conditions A and B in FA 2003, Sch. 4ZA, para.3). This decision was confirmed by an HMRC review which P N Bewley Ltd never requested.

• P N Bewley Ltd appealed the decision on the grounds that at the time of the transaction the bungalow was in a dilapidated condition, and it was neither used nor suitable for use as a dwelling.

• The bungalow had been vacant for a while and although the property was connected to services such as gas and water; the radiators, pipework and floorboards had been removed. Furthermore the presence of asbestos was a danger and needed immediate removal which hence made renovation necessary.

• With reference to Finance Act 2003, Sch. 4ZA, para. 18(2)(a) therefore the bungalow did not count as a dwelling, and thus the higher rate should not have applied to this transaction.

Outcome

• As a result, the tribunal agreed that the overall condition of the property rendered unsuitable to be used as a dwelling as it did not fall within the definition of a ‘residential property’. Subsequently, non-residential rates should apply for the calculation of the SDLT due, which reduced the SDLT payable to £1,000.

 
If you want to claim a tax rebate or exemption on the above basis, HMRC are likely to want to see evidence in relation to the condition of the property.
 
HMRC will want to see evidence of the properties condition prior to and at the time of the sale (transaction) to ensure that the property has not been damaged on purpose for tax avoidance purposes.
 
If you are purchasing a dilapidated property, it is recommended to try to get as much evidence as possible, as close as possible to the date of the purchase and before any work has started.
 
If you would like assistance with filing your SDLT return, claiming an SDLT rebate or exemption please contact us on [email protected].
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Alex Bahamin ACCA MAAT

​About The Author;

Alex is a qualified chartered certified accountant, member of ACCA and AAT.

He is a property tax advisor, investor and has been helping landlords keep more of their wealth for themselves and their families.

With both technical expertise and personal experience of being a property investor himself, Alex can help other property investors save tax and structure their businesses in the most efficient way.