Thousands of buy to let investors may be due stamp duty rebates - claim

Landlords have been urged to seek advice about potential stamp duty rebates on ‘uninhabitable’ second properties after a landmark tribunal case.

A recent case - involving P N Bewley Ltd and HMRC - has suggested that properties that are not immediately habitable at the time of completion do not constitute a “dwelling” for the purpose of the Finance Act 2003.

And according to a legal firm, Primas Law, this finding could have major implications for the UK housing market. That’s because the decision means that P N Bewley is not liable to pay the additional three per cent stamp duty surcharge applicable to second properties.

It could mean that those who have paid stamp duty on similar uninhabitable properties – including potentially thousands of UK landlords and developers – may have paid an inappropriate level of tax and could seek to reclaim them.

As a result of the outcome of this case, Primas Law says it is being instructed to act for a large and growing number of landlords and developers seeking to recover stamp duty paid for properties that, potentially, should not have attracted the additional tax.

Daniel Thomas, head of litigation at Primas Law, says: “To provide more context to this particular case, the property that P N Bewley purchased was a bungalow and a plot of land in Western-super-Mare. The company’s intention was to demolish the bungalow and build a new dwelling on the land with planning permission already being granted. The bungalow was essentially a derelict building that had been unoccupied for around three years.

“The tribunal was provided with photographs of the derelict building and these demonstrated the heating system, radiators, floorboards and pipework had been removed, and that the property – both internally and externally – was in a very poor condition.

“It was also provided with reports from surveyors that concluded asbestos was present in the property and urgently needed removing.”

On presentation of P N Bewley’s evidence, the tribunal concluded there was “no doubt a passing tramp or group of squatters could have lived in the bungalow… we have no hesitation that, in this case, the bungalow was not suitable for use as a dwelling.”

As a result of this, P N Bewley was not required to pay the SDLT surcharge in this instance.

“This case highlights the importance of developers, estate agents and conveyancers fully understanding the condition of a property, and what potential benefits this offers to a purchaser” adds Thomas.

“It also highlights that developers and landlords who have potentially paid an inappropriate level of tax may be able seek to reclaim the same, if similar circumstances permit.

“It’s a real landmark case for UK property developers and landlords and adds an interesting new dynamic to the debate. We’re currently acting on behalf of a number of property developers and landlords to help them better understand the risks and opportunities, and we think many more will also be looking into these findings in much more detail. For some, it could be significant.”