As most experienced property developers and landlords will know, a Stamp Duty Land Tax (or ‘SDLT’) surcharge applies to purchases of additional dwellings. However, if the property you purchased was unhabitable, should that surcharge have been paid?
In recent weeks, this topic has been under close scrutiny as part of a landmark tax tribunal case between P N Bewley Ltd and HMRC. Now complete, this case opened up some incredibly interesting outcomes for property developers and landlords, including many we support at Primas Law.
The case held that properties that are not immediately habitable at the time of completion will not constitute as a “dwelling” for the purpose of the Finance Act 2003. This had important ramifications, as it meant that P N Bewley were not liable to pay the additional three per cent ‘second home surcharge’.
The outcome of this case, in particular, has some potentially far-reaching consequences. And this is important for us because, at Primas Law, we have been instructed to act for a number of landlords and developers to recover stamp duty paid for property which ought not to have attracted the additional tax.
To provide some context to this particular case, the property that P N Bewley purchased was a bungalow and a plot of land in Western-super-Mare.
The company’s intention was to demolish the bungalow and build a new dwelling on the land with planning permission already being granted.
The bungalow was essentially a derelict building that had been unoccupied for around three years. The tribunal was provided photographs of the derelict building and these demonstrated that the heating system, radiators, floorboards and pipework had been removed, and that the property – both internally and externally – was in a very poor condition. The tribunal was also provided with reports from surveyors that concluded asbestos was present in the property and urgently needed removing.
On presentation of P N Bewley’s evidence, the tribunal (rather brazenly I might add!) concluded there was “no doubt a passing tramp or group of squatters could have lived in the bungalow…….we have no hesitation that, in this case, the bungalow was not suitable for use as a dwelling.”
As a result of this, P N Bewley were not required to pay the SDLT surcharge in this instance.
It goes without saying that this case – like many others – was decided on its own merits and facts.
The tribunal in no way provided specific guidance or created any staged test around what would make a building deemed to be ‘inhabitable’.
However, what this case does highlight is the importance of developers, estate agents and conveyancers fully understanding the condition of a property, and what potential benefits this offers to a purchaser. It also highlights that developers and landlords who have paid an inappropriate level of tax may be able seek to reclaim the same…if circumstances permit.
It’s an interesting new dynamic to the debate, but we’re now speaking to lots of property developers and landlords to help them better understand the risks and opportunities.
If you would like us to consider whether you might be entitled to a rebate due to the uninhabitable nature of a second property, or you’d like to find out what this means to your property portfolio, then please contact us on 01928 248 672 or email us at email@example.com.