Reasons to choose Wilson Browne
Since 1st April 2016, stamp duty rates for residential property have become significantly more complicated.
From that time there has been an additional 3% charge for the purchase of second residential properties.
In P N Bewley Ltd v HMRC  UKFTT 65 (TC) (28 January 2019), HMRC had challenged an assessment and claimed that the 3% surcharge should have been applied. The buyer had previously declared and paid on the basis that it was residential property but that the surcharge did not apply.
The property in question was a bungalow which was to be demolished after purchase because it was in such a poor state of repair. The bungalow had significant asbestos and had already had its heating system, pipes and floorboards removed – it could not safely be repaired.
The First Tier Tribunal completely rejected HMRC’s claim as it judged that as the bungalow could not be used it could not be classed as residential and therefore not only was the surcharge not applicable but the property should be assessed on the basis that it was not residential at all. The Tribunal also indicated that it would be slow to impose the surcharge where avoidance schemes were not involved particularly if the aim was to bring something back into use given the purpose of the surcharge scheme was to support the housing market.
This case provides clarification for developers and encouragement to challenge HMRC. It may also be an encouragement for developers to start from scratch rather than repair and an encouragement for sellers to ensure a dilapidated house is completely uninhabitable.