Stamp Duty Land Tax Surcharge – HMRC Are Getting it Wrong

Could you be one of many taxpayers who have been overcharged Stamp Duty Land Tax (SDLT) by HMRC since 2016?

HMRC have just lost a case where they incorrectly charged the “higher rate” of SDLT on a residential property purchase. If you bought a second residential property or Buy to Let since April 2016 then you have probably been hit with an extra 3% SDLT rate on top of the normal SDLT rate.  It means for example that a £200,000 property would have cost you a much higher £7,500 in SDLT, not the standard £1,500.

Paul and Nikki Bewley bought a derelict property and were hit by the higher SDLT charge. They challenged HMRC, arguing that at purchase the property was not capable of habitation, and so could not be considered a “dwelling” as it was not used, or suitable to be used, as a home.  The Tax Tribunal has agreed with Mr and Mrs Bewley.  HMRC are still considering whether to challenge the judgement.  The Tribunal said that “the bungalow had lain empty and the radiators, pipework and floorboards had been removed; furthermore, the extensive presence of asbestos made renovation or refurbishment an unviable proposition. Given this state of affairs, and by reference to the available authorities and to HMRC guidance, the Tribunal had no hesitation in holding that the bungalow was not suitable for use as a dwelling.”

If you bought a residential property that was not capable of habitation at the time, and paid the higher rate of SDLT, you should consider lodging an amended SDLT return with HMRC to reclaim your extra SDLT.  The normal time limit for amending an SDLT return is 12 months from the original return.  However, under “Overpayment Relief” you can potentially go back to the start of the new rules, if you acquired a property on or after 1 April 2016, on the basis that the SDLT was charged in error.

The test of whether a property was incapable of habitation should be thought through carefully and you should put a strong line of argument to HMRC to accompany your reclaim. If the property was simply badly in need of decoration and overdue maintenance, then your argument won’t pass muster.