Vandalised property was residential for SDLT purposes

In Amarjeet and Tajinder Mudan v HMRC [2023] TC8777, the First Tier Tribunal (FTT) found a house in a state of disrepair remained 'residential property' for Stamp Duty Land Tax (SDLT) purposes.

• Mr & Mrs Mudan purchased a property in London for £1.75m in August 2019.
• They paid Stamp Duty Land Tax of £177k on the basis that the purchase was of Residential Property.
• In July 2020, the taxpayers Amended their SDLT Return to claim a refund of £100k on the basis that the purchase was not of residential property as the property was not suitable for use as a dwelling due to its state of disrepair.
  • The utilities weren’t functioning safely, the electrics were described as a disaster and the house needed full rewiring.
  • The property had been extensively vandalised, the boiler was detached from the wall and there was a hole in the roof letting in rainwater.
  • There were infestations of rats and mice.
  • The basement was flooded.
  • The external doors and windows had been broken open.
• The taxpayers moved into the property in May 2020 with their young family once building work had been partially completed.
• HMRC opened an enquiry and issued a closure notice on the basis that the property was suitable for use as a dwelling and constituted residential property.
• The taxpayers Appealed to the FTT.

The FTT found that:

• Residential property is a building that is used or suitable for use as a dwelling or is in the process of being constructed or adapted for such use.
• Suitable for use did not mean being ready for immediate occupation.
• The bar of disrepair to turn what would otherwise be a dwelling into non-residential property was high.
• It must be unrealistic to expect someone to live in the property in its current state because it is too dangerous or unpleasant to inhabit and it must require ‘fundamental’ issues to be fixed to make it suitable for occupation.
• On balance, the property was a dwelling as:
  • That a building was recently used as a dwelling.
  • It had not been adapted for another purpose while empty.
  • It was capable of being used as a dwelling again.
  • There were no structural, or fundamental problems, which needed fixing prior to occupation.
  • The works undertaken prior to occupation were akin to repairs and renovation and were not sufficiently fundamental to make it non-residential property.

The appeal was dismissed.

Useful guides on this topic

SDLT: Residential property & dwellings
What is residential property for Stamp Duty Land Tax (SDLT)? What tax rate applies? What garden and grounds are subject to higher rates of SDLT?

SDLT: Amending returns
How do I amend an SDLT return?  When can I amend an SDLT return?  How do I claim and SDLT refund?  How do I deal with contingent consideration?

How to appeal an HMRC decision
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

SDLT: At a glance, Stamp Duty Land Tax, rates & allowances
What is Stamp Duty Land Tax (SDLT)? What are the rates of Stamp Duty Land Tax (SDLT)?

External links

Amarjeet and Tajinder Mudan v HMRC [2023] TC8777