Malcolm Finney looks at a recent case on the meaning of the term ‘dwelling’ for the purpose of the higher rates of stamp duly land tax.
The recent case of P N Bewley Ltd v HMRC [2019] UKFTT 65 (TC) before the First-tier Tribunal (FTT) examined what is meant by the term ‘dwelling’ in ascertaining whether the higher rates of stamp duty land tax (SDLT) applied on the purchase of a residential property by a company. The property was a bungalow in Weston-super-Mare and the purchase was made by P N Bewley Ltd, a company.
HMRC argued that the higher SDLT rates applied to the purchase as it constituted a dwelling and increased the SDLT payable from £1,500 to £7,500. P N Bewley Ltd then appealed against the amendment made by HMRC to the SDLT return. The contract date and completion date were both shown as 24 January 2017.
The legislation defines a dwelling as a building ‘if it is used or suitable for use as a… dwelling or is in the process of being constructed or adapted for such use’ (FA 2003, S 4ZA, para 17 & 18).
State of the bungalow
A survey of the property stated ‘‘The existing property is a derelict bungalow in poor internal condition, which we understand is to be demolished…’ and a report to the funding bank stated ‘ ...that there was a building on the site described as a ‘derelict bungalow to be demolished’ ‘. The application for planning permission referred to ‘demolition of existing dwelling and erection of replacement building.’
It was argued that the property was not habitable at the time of purchase and was unviable as a renovation or refurbishment. Asbestos-containing materials had been identified during one of the surveys.
Test of what is a dwelling
The FTT said that the sole issue for them to determine was whether the bungalow, which they said was undoubtedly a building, was, at the date of completion, suitable for use as a single dwelling. It was accepted that the bungalow was not at that date used as a dwelling and consisted of a single dwelling.
Whether the bungalow could have been renovated and occupied as a dwelling was deemed to be irrelevant. The relevant test was whether it was ‘suitable’ to be used as a dwelling at the time of purchase and not whether it was capable of becoming so used in the future.
FTT decision
The decision of the FTT was unequivocal. Whilst accepting that dilapidation of a dwelling does not necessarily prevent it from being a dwelling, they had no hesitation in concluding that the bungalow was not suitable for use as a dwelling, in particular when taking into account the state of the building as shown in the photographs on Mrs Bewley’s phone with radiators and pipework removed and with the presence of asbestos preventing any repairs or alterations that would not pose a risk to those carrying them out.
Reference was also made to HMRC’s own guidance note published on 16 March 2016, which referred to the availability of ‘facilities required for day-to-day private domestic existence’ stating that none of these facilities were present in the bungalow on the completion date.
The FTT also seemed bemused (and no doubt a little annoyed) by HMRC’s arguments commenting ‘On several occasions during HMRC’s submissions on the case we found ourselves wondering what the relevance of the point being made was. We still do wonder, and so in an effort to assist HMRC in similar cases in future we make these preliminary comments’.
Practical Tip:
Don’t automatically accept HMRC’s arguments. They may simply be completely irrelevant to the point under discussion.
