The case of Henderson Acquisitions Ltd v HM Revenue & Customs (HMRC) centers around an appeal brought by Henderson Acquisitions Limited (the Appellant) against HMRC's decision to refuse a claim for a refund of stamp duty land tax (SDLT).
The Appellant sought a refund of £12,350 following the acquisition of a property on Bedford Road in Letchworth Hertfordshire on August 26, 2016.
This analysis will provide an overview of the case, discuss the relevant legal provisions, and explore the evidence and factual findings.
The appeal revolves around the Finance Act 2003 (FA03), which imposes SDLT on the acquisition of chargeable interests in land in England and Northern Ireland. The amount of SDLT charged depends on several factors, including :
- whether the property is residential or non-residential,
- the status of the purchaser, and
- the consideration paid.
In this case, the crucial issue is whether the property was "suitable for use as a dwelling" as per the statutory definition.
Evidence and Factual Findings
During the hearing, Mr. Henderson, representing the Appellant, provided detailed descriptions of the property at the effective date of the transaction (EDT) through photographs and outlined floor plans. Several important facts emerged during the hearing:
- The Appellant's business involves purchasing, renovating, and reselling domestic houses.
- The property was acquired from the estate of its former owner, who had passed away and remained vacant during probate.
- Stamp Duty Land Tax (SDLT) was paid based on the assumption that the property was residential and purchased by a company, resulting in higher SDLT rates.
- The property was deemed suitable for renovation upon Mr. Henderson's initial visit.
- After the purchase, the kitchen ceiling partially collapsed due to a leaking water pipe, damaging the floor above. Acrow props were used to support the affected areas.
- The damaged joists were replaced, and other works were carried out, including rewiring and replacement of central heating system.
- Despite the damage, the stairs and parts of the property remained accessible, and the damage affected less than half of the property's floor area.
The central issue, in this case, was whether the property was suitable for use as a dwelling on the date of acquisition.
Submissions of the Parties
The Appellant relied primarily on the precedent set by the PN Bewley Ltd v HMRC (Bewley) case, where a derelict property required demolition and was found unsuitable for use as a dwelling.
The Appellant argued that the extensive renovation works, particularly the replacement of joists and the collapsed ceiling, rendered the property unsuitable for use as a dwelling, justifying a lower Stamp Duty Land Tax (SDLT) Rate.
HMRC contended that a property must be Derelict and require demolition to be considered unsuitable for use as a dwelling. They argued that even with extensive renovation, as long as the property could be made habitable without demolition, it should be taxed at the residential SDLT rate.
The case primarily hinges on the interpretation of "suitable for use as a dwelling."
The SDLT provisions aim to tax residential properties at higher rates than non-residential ones, and this interpretation must align with that statutory purpose.
The Upper Tribunal's analysis in Fiander v HMRC (Fiander) is essential to understanding the interpretation of suitability. Fiander's case clarified that a property in some degree of disrepair could still be suitable for use as a dwelling if repair or renovation were feasible.
The key distinction is whether the property realistically requires demolition or is fundamentally unsound. Facilities for washing, cooking, and sleeping are crucial, and a property lacking these facilities is unlikely to be suitable for use as a dwelling.
In the case of Henderson Acquisitions Ltd v HMRC, the Tribunal ruled that the property, despite experiencing damage and requiring extensive renovation, remained structurally sound and suitable for use as a dwelling.
Therefore, it should be taxed at the residential SDLT rate. The judgment emphasises that suitability for use is a question of fact, and the disrepair should not prevent a property from being considered a dwelling if the required repairs or renovations are possible.
This case provides valuable insights into interpreting SDLT provisions and determining a property's suitability for use as a dwelling, serving as a precedent for future disputes in this context.
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