A first-tier tax tribunal has ruled that houses too dilapidated to live in are not liable for higher rates of stamp duty land tax (SDLT) and instead are only liable for the basic rate.

SDLT is a tax payable on any land or property purchased above the current threshold (£125,000 for residential properties and £150,000 for non-residential land and properties).

Typically, an additional rate of SDLT is payable on a person’s second residential property, or when the property is purchased by a company. Up until now, the liveability of the property was not considered and any second property was liable to be charged the higher rate.

However, an unprecedented case involving a property and plot of land in Weston-super-Mare, that had been vacant for years and was in a state of disarray, with asbestos and structural holes throughout, has changed that.

The purchasers argued that the property was not suitable for occupation due to its dilapidated condition, but this was challenged by HMRC, who argued that the property was still a dwelling none the less. The case was then escalated to a first-tier tax tribunal, where the judge agreed that the ‘property’ was completely unsuitable to be used as a dwelling/ second residential property, and therefore not liable to pay the 3% SDLT surcharge.

Despite it’s potential to be transformed into a suitable property (which the owners did do eventually), the judge noted that the property was unsuitable to live in at the point the SDLT was payable, therefore highlighting that the higher rate was not applicable as the property could not be treated as residential.

In addition, SDLT was only payable at the non-residential rate.

Catherine Desmond, Partner at Smith Cooper, Accountants and Business Advisers based across the Midlands, commented “This is a fantastic, common-sense, result for the purchasers, and for others going forward who wish to invest in such properties.”

“Here at Smith Cooper, we provide holistic advice to a broad range of clients – particularly property owners and family businesses – and help them navigate the tax implications of a range of transactions to ensure the best outcome possible.”

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