The First-tier Tribunal (FTT) recently delivered a significant ruling clarifying the distinction between "use" and "occupation" when determining residential property classification for Stamp Duty Land Tax (SDLT) purposes.
The case involved two partially constructed properties in London, where the construction had stalled. Due to planning restrictions that prohibited occupation until a separate, unrelated development was complete, the site was essentially a building site with scaffolding, exposed structures, and incomplete works. The appellant had attempted to acquire that other property to lift the restriction but was ultimately unsuccessful. Hence, although SDLT was initially paid on a residential basis, the appellant later pursued a refund through the overpayment relief route, contending that the property should be considered non-residential. HMRC refused this claim.
The FTT, relying on a multi-factorial approach, focused on the objective nature of the chargeable interest acquired to assess the property's essential characteristics at completion date. Applying the reasoning provided in Mudan v HMRC [2024] UKUT 307 (TCC), the FTT distinguished between "use" and "occupation," finding that these terms are not synonymous when determining whether a property is residential.
Although the planning restriction imposed a prohibition on occupation pending completion of the other property, it did not affect the essential characteristics and nature of the building as a dwelling. Instead, it created a non-permanent restriction that could be satisfied upon completion of the linked development. These do not negate a building's fundamental suitability for use as a dwelling where they merely delay occupation rather than permanently preclude residential use.
To summarise, the FTT's emphasis that temporary restrictions on occupation do not automatically disqualify a property from being classified as residential for SDLT purposes reinforces that such classification hinges on the property's objective physical characteristics, rather than buyer-specific barriers to occupation. This interpretation extends the use/occupation distinction established in Mudan beyond issues of repair, applying it also to planning-related restrictions.
Read the full decision of Bemal Patel v HMRC [2025] UKFTT 373 (TC) here.
