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Stamp Duty Land Tax - When is a Property Unsuitable for Use as a Dwelling?

A newly purchased house may require a great deal of renovation and repair work to render it habitable – but does that mean it is unsuitable for use as a dwelling for the purposes of Stamp Duty Land Tax (SDLT)? A tribunal considered that issue in a guideline case.

A couple paid over £1.7 million for a detached house that had in the past been tenanted but which had been empty for some months prior to its acquisition. Amidst signs of vandalism, the property was strewn with rubbish and the kitchen gave off an unbearable smell. The boiler was hanging off the wall, the basement was flooded by leaking water pipes, utilities could not safely be used and the property's electrical wiring was in a life-threatening condition.

The couple paid £177,000 in SDLT on purchasing the property, but subsequently asserted that they were entitled to a rebate of almost £100,000 on the basis that it was not suitable for use as a dwelling on the date of acquisition. The matter came before the First-tier Tribunal (FTT) after HM Revenue and Customs took a contrary view.

Ruling on the matter, the FTT accepted that the state of the property was not such that a reasonable buyer might be expected to move in straight away. Amongst other things, the property required complete rewiring and installation of a new boiler and pipework. Broken windows and doors required repair to make the property secure and skip loads of rubbish had to be removed.

In rejecting the couple's challenge, however, the FTT noted that suitability for use as a dwelling house is not equated with immediate readiness for occupation. In the context of SDLT, only very serious, fundamental problems – such as radioactivity or a risk of imminent structural collapse – are sufficient to render a property unsuitable for such use.

Whilst accepting that it would have been dangerous for the couple to move into the property immediately, the FTT noted that the relevant defects were curable. They were not fundamental and did not come anywhere near the threshold at which a reduced rate of SDLT is payable.

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