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Stamp Duty Land Tax (SDLT) is payable by anyone who buys land and property in England and Northern Ireland. The amount payable depends upon the price of the property and the nature of the transaction taking place. SDLT rates are generally higher for ‘residential’ property than for ‘non-residential’ property. As a result, there have been a substantial number of cases in which purchasers have sought to demonstrate there is a ‘non-residential’ element to their purchase so as to save significant amounts of SDLT.
The landmark case in this area is P N Bewley Ltd v HMRC  UKFTT 65 (TC). The First Tier Tribunal held that a derelict bungalow (bought for demolition and redevelopment) should be treated as non-residential property. This was on the basis that on the date of completion, the building was not “suitable for use as a single dwelling” due to the presence of asbestos, the removal of the central heating system and floorboards. Consequently, the higher rate stamp duty (often referred to as the 3% surcharge) did not apply.
HMRC guidance sets out that a dwelling that has become derelict is no longer residential. There is however, a distinction that can be drawn between a property that is derelict and one that is only in need in modernisation or repair. The recent case of Mudan  UKFTT 317 (TC) is insightful when considering this distinction. Mr Mudan claimed the property was non-residential at the date of completion and as such fell within the scope of non-residential SDLT rates. This was on the grounds that there was an extensive degree of work needed to be carried out at the property, from rewiring to dealing with ‘unbearable’ odours which made the house unsuitable for occupation.
HMRC concluded that the property was in fact suitable for use as a dwelling at the date of the transaction as the structure was essentially sound. Despite the vandalisation and disheveled nature of the property, the Tribunal Judge agreed. In his judgement, Judge Baldwin (known to his friends as ‘Smart Alec’ apparently) noted that even if the property is not ready for immediate occupation the work required must go beyond anything that may ordinarily be described as ‘repair, renovation or fixing things’. For example, a high risk of structural collapse or radioactive contamination. A reasonable buyer would therefore be required to carry out the necessary works in this case and as such the threshold was not met and the appeal was dismissed.
Another relevant case of Fish Homes Ltd v HMRC  UKFTT 180 (TC) centred around a property with defective cladding. The appellant argued that the property could not be considered a dwelling due to the danger presented by the flammable cladding. The tribunal however, found that the failure to comply with building regulations did not alone render the property unsuitable for use and thus the residential rates of SDLT applied.
In considering current case law, it is clear that the court requires a significant degree of disrepair and fundamental problems to render a property unsuitable for use as a dwelling
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