Since April 2016, anyone who purchases a second home as a holiday home or an investment has to pay a higher rate of Stamp Duty Land Tax at 3%. However, a recent Tribunal case in Bristol held that a couple were not liable to pay Stamp Duty Land Tax at the higher rate because the property they bought was not habitable at the date of completion.
In P N Bewley v Her Majesty’s Revenue and Customs (2019) UK FTT 65, Mr and Mrs Bewley had purchased a bungalow which had been built using timber frame and asbestos cement infill parcels. Mr and Mrs Bewley had a survey carried out on the Property which recommended the asbestos was removed urgently. Another survey conducted for a Mortgage Lender on the Property stated the Property was a derelict bungalow and should be demolished. The copper pipes, heating system and some of the floorboards had previously been removed from the property. Mr and Mrs Bewley demolished the bungalow and built a new home on the land. On completion, Mr and Mrs Bewley paid the lower rate of Stamp Duty Land Tax but Her Majesty’s Revenue and Customs disagreed and stated that as Mr and Mrs Bewley’s purchase of this Property was a second property, they should pay Stamp Duty Land Tax at the higher rates.
The Tribunal held Mr and Mrs Bewley were not liable to pay the higher rate of Stamp Duty Land Tax as the bungalow could not have been lived in straightaway. The test of whether the higher rate is payable is set out in Part 18 Schedule 4ZA of the Finance Act 2003, and hinges on whether a property is used as a dwelling or not. The Housing Act 1957 defines a habitable property as one which has a functioning toilet, bathing and cooking facilities which are available to the Occupier. There is no need to have heating in the Property for it to be deemed habitable. The Tribunal held as the bungalow was not used as a dwelling at the time of purchase and was not suitable to be used as such, Mr and Mrs Bewley were not liable to pay the higher rate of Stamp Duty Land Tax.
The implication of the case is that it could be used as a precedent for other people who wish to purchase second homes and could be seen as a way of avoiding the higher rate of Stamp Duty Land Tax. However, the facts of the case were specific and one thing that helped Mr and Mrs Bewley was the photographs they kept of the condition of the property when they purchased it.