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We have recently assisted a client in reaching agreement with HMRC that the 3% surcharge on ‘additional property’ was not payable on the purchase of a property because it was derelict and too run down to live in.
Of course, this does not mean that this is a silver bullet for people buying fixer-uppers! Indeed, the facts are of significant importance.
Of course, the 3% SDLT rate will usually apply to a residential property either where:
However, where the property is derelict it can be argued that the lower non-residential rates of SDLT should apply to the transaction. This is on the basis that the property is not suitable for occupation.
In our case, the following facts were relevant:
These facts were quite similar to the recent Tribunal case of Bewley.
HMRC accepted that the 3% additional property surcharge did not apply.
Summary – SDLT & Derelict Properties
The relevant legal test is whether the building is ‘suitable’ for use as a dwelling at the point at which the SDLT became payable.
It is not a case of whether the property is ‘capable’ of such use. As the FTT stated in Bewley, it is not whether ‘a passing tramp or group of squatters could [live there]’.
Further, it does not matter whether the property can be modernised and renovated and then used as a dwelling.
One simply is required to look at the state of the property at the time of purchase and ask a simple question. Is the property suitable as a dwelling on that day?
Get Stamp Duty Licked
SDLT is becoming an incredibly complicated form of property tax and, in many cases, is being dealt with in the cut and thrust of busy conveyancing offices.
However, as the tax becomes more complex, and reliefs more and more important, is it worth you getting a second opinion to make sure you, or your clients, have not paid too much tax?
If you need some help or a second opinion with SDLT then please get in touch with a member of our helpful team or be sure to read more about proper tax below.