What is an uninhabitable property?

In stamp duty, there is an important difference between a dilapidated house in need of renovation and a truly uninhabitable dwelling, as the case law decisions make clear. In this article, we will examine the criteria for uninhabitable property.

The First-tier Tax Tribunal (“FTT”) decision in Mudan contains a useful summary of the present approach to stamp duty uninhabitable property at para 53: “…I consider that a building which was recently used as a dwelling, has not in the interim been adapted for another use and is capable of being so used again (a building, such as the one in Bewley, the defects in which cannot be put right at all, will not be capable of being so used) will count as a dwelling, even though it is not ready for immediate occupation unless the reason/s why it is not ready for immediate occupation are so fundamental (being radioactive or at high risk of collapsing, for example) that the work required to put these problems right goes beyond anything that might ordinarily be described as repair, renovation or “fixing things” (examples of this sort of work being installing a new boiler or heating system, damp problems or floors needing replacing).” [Emphasis]. This decision is, however, under appeal by the taxpayer, and a decision is awaited.

What makes a property uninhabitable?

Essentially, on a strict view of the current law the defects must not be capable of being put right at all before the building can be classed as uninhabitable. In PN Bewley Ltd v HMRC [2019] UKFTT 0065 (TC) a derelict bungalow building acquired for demolition and replacement with a new dwelling was held to be non-residential property and chargeable at the lower rates in Table B but in Fish Homes Ltd v HMRC [2020] UKFTT 180 (TC) a flat with defective cladding (similar to that used on Grenfell Tower that exacerbated a disastrous fire) was still considered to be a dwelling.

What are the key criteria for an uninhabitable property?

The key criteria are serious structural issues that have left the building or parts of it at risk of collapsing or the presence of dangerous asbestos. In Davis & Guilbert v HMRC TC/2022/11605V the FTT found that the property was not used or suitable for use as a dwelling because of structural issues and the presence of asbestos which rendered the property potentially dangerous so that the non-residential rates of SDLT applied. This is a particularly robust decision because it appeared from the evidence that there had been people occupying the property in the weeks before completion.

What does not count as an uninhabitable property for SDLT purposes?

As the judge said in Mudan, anything that might ordinarily be described as repair, renovation or “fixing things” (examples of this sort of work being installing a new boiler or heating system, damp problems or floors needing replacing) will not make the building uninhabitable. The occupation of the building in the recent past can be a good indicator that the building is not uninhabitable,

Do you pay stamp duty on uninhabitable property?

Yes, but at the lower rates in Table B with a top rate of 5% on the slice of the purchase price above £250,000 and no 3% higher rates for additional dwellings or 2% additional rate for non-UK resident purchasers.

Can you reclaim stamp duty if your property is uninhabitable?

Yes, you can reclaim stamp duty on uninhabitable property. If you paid the full residential rates of stamp duty but your property was truly uninhabitable then a refund claim can be made to HMRC based on the lower rates of stamp duty that should have been paid.

How to do you reclaim stamp duty on an uninhabitable property?

Stamp duty refund claims for uninhabitable dwellings must be made by post to BT Stamp Duty Land Tax, HM Revenue and Customs, BX9 1HD. You can read my guide to making stamp duty refund claims here.

What is the PN Bewley v HMRC case and why is it relevant for uninhabitable property?

The Bewley decision was the first reported FTT decision that highlighted how, if a building was uninhabitable, the normal rates of residential stamp duty and the 3% higher rates for companies buying a dwelling would not apply. Uninhabitable property stamp duty therefore carries a top rate of 5%.

As a barrister in independent practice who is authorised to accept instructions direct from members of the public, I can review your potential stamp duty refund uninhabitable property claim and offer you objective advice based on my extensive experience in representing clients before the tax tribunals in cases concerning SDLT refunds. Contact me here.