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Buyer Loses £12k Stamp Duty Refund Appeal for Derelict Bungalow

Published by UK Property Accountants,
Posted Date: September 19, 2023 , Modified Date: February 7, 2024

A recent UK Resident, for the context of this article lets call him, Simon: recently faced a setback in his attempt to claim a stamp duty refund appeal of £12,350 in Stamp Duty Land Tax (SDLT). His company specialised in purchasing, renovating, and reselling residential properties.

Simon's case, which revolved around the suitability of his derelict bungalow for renovation, had been appealed to the First Tier Tribunal (FTT) after HMRC initially denied his refund claim.

On the 26th of August 2016, Simon acquired the bungalow from the estate of its former owner, who had passed away some time earlier. Despite its vacancy during probate proceedings, Simon believed the property had been a residential dwelling before the previous owner's demise.

Consequently, he paid SDLT at the higher residential property rates, as his company purchased it.

Stamp Duty Refund Appeal

Before the purchase, Simon had visited the property and deemed it suitable for renovation, though it required a bit of modernisation. However, upon revisiting it after the purchase, he discovered damage caused by a leaking water pipe in the central heating system.

This damage necessitated the building as a structurally unsafe dwelling. Aftermath, in May 2019, Stamp Duty Savers submitted a refund claim on Simon's behalf.

Furthermore, the claim was supported by:

  • Roof leaks
  • Damaged internal plasterworks
  • Missing/defective plasterwork
  • Other issues

Additionally, the property raised safety concerns that could jeopardise occupants. HMRC initiated an inquiry into the claim, seeking further information regarding the property's condition. Simon provided responses, but HMRC ultimately closed the inquiry and rejected the claim on March 30, 2020.

Tribunal’s Decision

At the heart of the case rested on whether the property was suitable for use, as a dwelling. HMRC argued that a building must be derelict and require demolition to be considered unsuitable for use as a dwelling.

But, in contrast, if renovation is possible without demolition, the property remains suitable!!

HMRC decision for Refund Appeal

Meanwhile, the tribunal even referenced the case of PN Bewley Ltd v HMRC, involving a derelict bungalow, and highlighted a crucial distinction. Unlike Bewley, where demolition was necessary, Simon's property, while in need of modernisation, was still habitable and had previously been lived in.

The required renovation work was typical of what might be needed in an occupied house.

Conclusion

Finally, the judge concluded that the property's history as a dwelling with some structural issues did not render it structurally unsafe and unsuitable for use as a dwelling.

As long as a property has facilities for essential functions like washing, cooking, and sleeping, it can be considered suitable for use as a dwelling, even if those facilities need repair or replacement.

At the end of it all, the appeal was dismissed, and Simon's £12,350 refund claim for Stamp Duty Land Tax remained denied.

Similar to Simon, if you have questions or concerns about your business and property-related activities, don't hesitate to reach out to UK Property Accountants.

We offer a FREE initial 15-minute discovery call! So, why not call us now?

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