From 2016, anyone buying a property in England has to pay an additional 3% SDLT surcharge if they own more than one property at the end of the day, and have not replaced their main residence.
Simply put, this surcharge is intended to make it more expensive for individuals to acquire a buy-to-let property when you already own your home, or to acquire an additional buy-to-let property.
The surcharge also applies when a company acquires any residential property.
What’s changed?
A recent First Tier Tribunal decision in the case of P N Bewley Ltd vs HMRC (TC06951) found that in order to be ‘residential property’ the property had to be habitable when purchased.
In this particular case, asbestos had been found at the property, and although it was connected to amenities, the heating system and floorboards had been removed.
The tribunal decided that this property was not suitable for use as a dwelling when it was acquired and that the SDLT surcharge did not apply.
What should I do?
Recent purchasers of derelict property may like to revisit the state of that property when it was acquired and consider whether an amendment to their SDLT returns might be appropriate.
If you are looking to acquire this type of property in the future, speak to your solicitor or tax adviser about this case and whether the surcharge should be disapplied.
Care should be taken though, as:
- First Tier decisions do not set legal precedent, and HMRC have the option to appeal to the Upper Tribunal which may reverse the decision.
- Every property is different and HMRC is likely to challenge whether properties are habitable or not. In this case there was clear, contemporary photographic and other evidence as to the state of the property.
- An SDLT Return can only be amended up to 12 months from its original filing deadline.
To read the formal decision, click here
