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Seriously derelict houses do not attract higher rates of stamp duty, UK tax tribunal rules

Thursday, 7 February, 2019

Higher rate stamp duty need not be paid on the purchase of a property that is too dilapidated to live in, the First-tier Tax Tribunal has ruled.

The property concerned was a derelict bungalow and plot of land in Weston-super-Mare. A couple, Paul and Nikki Bewley, set up a company to acquire it for GBP200,000 in January 2017, intending to demolish it and build a new dwelling on the same site. Planning permission for this operation had already been granted to the previous owner.

The property had been vacant for several years when the Bewleys bought it. The central heating system had been removed, and there were holes in the walls, ceilings and floors caused by a surveyors' inspection for the extent of white asbestos cement, of which the bungalow was largely constructed.

Higher rates of stamp duty land tax (SDLT) normally apply to a residential property either where the property is a person's second property or, as here, when the property is acquired by a company. But the Bewleys argued that they should only pay the non-residential rate of SDLT on the property, since it was clearly derelict and not suitable for occupation.

HMRC disagreed, arguing that the bungalow was a dwelling despite its dilapidation, and could be renovated to form a serviceable home. It amended the Bewleys’ tax assessment to apply the higher rate of SDLT.

The couple appealed to the First-tier Tax Tribunal, where the judge, Richard Thomas, took their side after a careful examination of statute and case law. He noted that the test set out in law is whether the building is 'suitable' for use as a dwelling at the point at which the SDLT became payable. After referring to some photographs supplied by the taxpayers, he decided that it clearly was not.

Thus, said Thomas, the property was not a dwelling and the additional rate of SDLT did not apply. Accordingly he ruled that the Bewleys had been overcharged, and reduced the self-assessment bill to GBP1,000 (PN Bewley Ltd v HMRC, 2019 UKFTT 0065 TC).