Recent SDLT Case Law
So running through the recent case law, the PN Bewley versus HMRC case, the case came about at the end of January this year, 28th of January, and basically a couple took HMRC to court.
They purchased a rundown second property, and the wording of the legislation basically says that stamp duty is payable if a house is suitable for use as a dwelling, so, if a property is suitable for use as a dwelling at the date of purchase. So this couple said it’s a run down property, clearly it’s not suitable for use at the date of purchase, therefore we shouldn’t be paying any stamp duty. HMRC said, well, if you spend some money refurbishing the property, five, 10,000 pounds say, then the property would be fit for use, fit for occupation.
This piece of case law basically became about what is classed as suitable for use. And the judge ruled in favor of the couple and against HMRC. The judge decided that it’s a day one assessment and if the property was in poor condition the date of purchase, then stamp duty isn’t payable.
So just moving on to the numbers, what they look like. So the property purchase price was 200,000 pounds. The couple were charged 7,500 pounds on that purchase. And the figures on the right are the commercial rates. So they basically said, because it’s not fit for use as a dwelling, commercial rates should apply. And that’s what happened. So the couple were refunded 6,500 pounds on a 200,000 pound property.
So what can we do for you? So just looking through the numbers, we’ve compiled a bit of a list here. So showing the property values and the rebates that you would get if you wanted to take this forward. So 100,000 pound property you’d get rebate of 3000 pounds. If it was say, 250,000 pounds, it’d be an 8,000 pound rebate. So 200 to 250,000 pounds is probably the most common value properties that we deal with, but we’ve also seen some much larger properties, particularly in London areas. So, if you happen to have bought property for a million pounds in London, you would be entitled to recover 34,000 pounds from switching it from residential to commercial rates.
So moving on, what qualifies? Fortunately the house doesn’t have to look like this. So in the case in question, in the PM Bewley case, there were a couple of issues. So the property had no central heating system, and there was some asbestos in the property. Although the asbestos was noted as being in good condition. Now, what we’d say as surveyors is that if asbestos is in good condition, you don’t touch it, leave it. Asbestos is in millions of homes. It could be in Artex in ceilings, it’s everywhere. So we think that the criteria applied or the issues that this property had, we don’t think that they were… Well, not saying that they weren’t severe, but it’s not like it has to be a rundown derelict property for the rebate to be repaid.
So in terms of evidence, the couple provided some photographs. They also had a statement from the chartered surveyor, saying that in the chartered surveyor’s opinion property wasn’t fit for use at the date of purchase, and that I think is one of the areas where we think we’ve got an edge.
Moving on to the next slide. So I thought it’d be useful to provide some examples of the sort of issues that we’re seeing. So these photos are from our clients, apart from the roofing one, we’ve not managed to get a good photo yet. So if anyone has any roofing issues, please send that through. But basically, these are the sort of issues that we think would be eligible. So if your property had roof leaks, or say if there were health and safety issues. So the second picture there is of a leaning chimney, the other photo’s from a survey report we had from one of our clients. So that’s defective lintel, breastsummer beam over the bay window. And you can see the crack in there, the lintel had to be replaced.
The next photo is a photo showing some mold growth, which is another fairly common issue that we’re seeing with the submissions that we’re receiving. What we’d say about mold growth is that mold can create respiratory issues, asthma, conjunctivitis, things that are bad for human health. So if a property has mold growth then we would say it wasn’t fit for occupation at the date of purchase. The next photo is fairly obvious. Obviously missing bathroom appliances, clearly it wasn’t fit for occupation at the date of purchase. Then another common one that we’re quite often seeing is electrics, there you can see that the fuse is burnt out. If you’ve had to rewire the place electrics, because of health and safety concerns, then we think that’s eligible.
So, added a couple more photos in here. So the next two, top two, are basically to show that not all properties have to be in severely rundown condition. The issue with these items is that there was no floor covering. So what we’d say is if you’ve got exposed floorboards, then that’s likely to be a dusty environment. Again, dust creates respiratory issues, which is a health and safety factor. Similarly, if you had defective plasterwork or missing plasterwork, you’ve got exposed brickwork, that would also create a dust environment. Photo in the top right, that was as a result of some watering, roof leaks, but there’s also the polystyrene ceiling tiles, which quite often are a health and safety issue because they’re highly flammable. Bottom left is broken glazing. You won’t want your children running around in a property if there was broken shards of glass everywhere. Next picture, obviously no kitchen. You can see that some of the electrics were on show. The final photo is to show missing floorboards. So that would be a trip hazard. You couldn’t live in a property like that without doing some form of work.
So we’ve also created a list here summarizing the issues that we think are applicable. So if there was nothing that jumped out at you before, please take a second to review this, see whether there’s anything that you can spot there, that you’ve had issues with yourselves in your own properties. If you’re unsure of anything, give us a call. We’re not saying that’s an extensive list, we’d be happy to chat through other items with you. In terms of eligibility, what does it take for you to be eligible for rebates?
So there’s four key things. Property has to have been purchased since April 2016. And the reason for that is that’s when the stamp duty surcharge rates kicked in, which is the additional three to 15 percent if you’re a landlord or already own a property elsewhere. The property has to have been empty or unoccupied at the date of purchase. Sometimes people don’t always know the answer to this, but the reason for this is we think it’d be very difficult to say to HMRC that property wasn’t fit for occupation if there was somebody occupying at the time, clearly they’d probably have something to say about that.