HMRC takes a firm stance on ‘uninhabitable dwellings’
27 June 2023
We used to see stamp duty land tax (SDLT) repayment agents targeting those who had properties with annexes, but after a few cases heard at the tribunal were successfully argued by HMRC that relief didn’t apply, these seem to be less common.
However, Facebook and Instagram have seen a boom in ads targeting those who have recently purchased a property to suggest that they may be entitled to an SDLT refund, as well as letters being sent to the new homeowners.
These firms look to promise a refund for ‘uninhabitable dwellings’ due to amending the SDLT return to apply non-residential rates of SDLT rather than the usually higher residential rates. Often these agents take a very large percentage of the refund too, leaving individuals with a much smaller portion of the refund themselves, as well as the risk of a HMRC enquiry should they believe the amended return to be incorrect.
A recent case heard at the first-tier tribunal, Mudan & Anor v HMRC, was won by HMRC based on the property being considered habitable. In Mudan & Anor’s case, the property was not suitable for use as a dwelling and therefore the non-residential rates of SDLT should be applied. This was due to the property being vandalised since it was last occupied and requiring various works before the property could be safely lived in. However, HMRC successfully argued that although at the time of completion the property was not suitable for immediate occupation, it was still considered as suitable for use as a dwelling for SDLT purposes and therefore no refund was available.
Whilst the first-tier tribunal case outcome does not provide a binding decision for future cases, it is certainly in line with HMRC’s view and its online guidance has now been updated to reflect this. It seems that there are very few situations where a property would be considered uninhabitable. High levels of asbestos, high radioactive pollution or high probability of walls collapsing are all listed as examples, but perhaps are not the reasons that repayment agents are targeting.
From this we can expect that HMRC will be cracking down on individuals looking for an easy refund and we wait to see how SDLT repayment agents look to go to market next time…
However, Facebook and Instagram have seen a boom in ads targeting those who have recently purchased a property to suggest that they may be entitled to an SDLT refund, as well as letters being sent to the new homeowners.
These firms look to promise a refund for ‘uninhabitable dwellings’ due to amending the SDLT return to apply non-residential rates of SDLT rather than the usually higher residential rates. Often these agents take a very large percentage of the refund too, leaving individuals with a much smaller portion of the refund themselves, as well as the risk of a HMRC enquiry should they believe the amended return to be incorrect.
A recent case heard at the first-tier tribunal, Mudan & Anor v HMRC, was won by HMRC based on the property being considered habitable. In Mudan & Anor’s case, the property was not suitable for use as a dwelling and therefore the non-residential rates of SDLT should be applied. This was due to the property being vandalised since it was last occupied and requiring various works before the property could be safely lived in. However, HMRC successfully argued that although at the time of completion the property was not suitable for immediate occupation, it was still considered as suitable for use as a dwelling for SDLT purposes and therefore no refund was available.
Whilst the first-tier tribunal case outcome does not provide a binding decision for future cases, it is certainly in line with HMRC’s view and its online guidance has now been updated to reflect this. It seems that there are very few situations where a property would be considered uninhabitable. High levels of asbestos, high radioactive pollution or high probability of walls collapsing are all listed as examples, but perhaps are not the reasons that repayment agents are targeting.
From this we can expect that HMRC will be cracking down on individuals looking for an easy refund and we wait to see how SDLT repayment agents look to go to market next time…
Michaela Norman
Associate Director
AUTHOR
Michaela Norman
Associate Director