HMRC: Renovating a Home Does Not Make It Uninhabitable

A property developer found himself embroiled in a stamp duty land tax (SDLT) dispute with HMRC. He sought a refund of £12,350, arguing that a recently acquired property, which required renovation, was not fit for habitation ...

However, his appeal to the First Tier Tribunal (FTT) did not find in his favour, cementing the distinction between a property in need of an upgrade and one that is genuinely uninhabitable.

"The property developer specialises in procuring, upgrading, and selling residential assets!"

The contentious property in question was procured on the 26th of August 2016 from the estate of a former owner, now deceased. The property had remained vacant after the owner's demise, awaiting probate procedures.

Upon acquisition, the developer, in line with SDLT regulations for company acquisitions of residential properties, paid the requisite stamp duty. He had assessed the property as needing modernisation ... not as uninhabitable. However, post-purchase, he discovered water damage from a burst central heating pipe. This leak damaged floor joists and the kitchen ceiling. For safety during renovations, he installed Acrow props across the affected areas.

Yet, crucially, accessibility within the property remained intact. Stairs to the upper level were safe, and rooms such as the sitting room and two bedrooms were unaffected!

The SDLT refund bid came into play on the 11th of May 2019, initiated by Stamp Duty Savers. Their contention hinged on various defects, including roof leaks and missing plasterwork. They further argued that potential health and safety hazards rendered the property unsuitable for habitation.

HMRC initiated an inquiry, seeking clarity on the property's condition. Based on the provided information, they concluded the refund claim lacked merit and rejected it on the 30th of March 2020.

One must note the precedent that played a significant role in the FTT's decision: the case of PN Bewley Ltd v HMRC. In this instance, the taxpayer had procured a genuinely derelict bungalow, lying unused for an extended period, void of basic amenities like floorboards, and radiators, and ridden with hazardous asbestos. This property was unsalvageable and required complete demolition.

"The FTT observed a stark contrast between the older case and this one!"

In the former, the derelict property was beyond repair and had to be demolished. This property, on the other hand, although needing updates, had recently been inhabited. The renovations the property developer identified were not dissimilar to those sometimes done in fully occupied homes.

The judge clarified the matter succinctly, saying that the property's previous use by the former owner, even with its dated amenities, established its status as a dwelling. Drawing on the precedent, it was noted that dwellings typically possess facilities for washing, cooking, and sleeping.

A property devoid of these amenities cannot be termed a dwelling. However, if a property has these, but needs repairs or replacements, it remains suitable for habitation.

In light of these deliberations, the tribunal dismissed the appeal.


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