A derelict bungalow which had been acquired by a company for redevelopment was found not to be a dwelling subject to an additional 3% SDLT surcharge on the basis that it was not suitable for use as a dwelling at the time it was acquired.
A company had bought a bungalow for £200k in January 2017. It then demolished the bungalow and built a house for resale. The bungalow had been lived in by an elderly lady until 2014, but then left empty and was in a poor state of repair. The heating system, copper pipes & floorboards had been removed, and there was asbestos present which meant that it was not viable to renovate/refurbish.
Since 1 April 2016, higher rates of SDLT apply to purchases of additional ‘dwellings’, such as second homes and buy to let properties. The additional 3% also applies to all acquisitions of UK dwellings by companies and other non-natural persons.
The purchasers had paid residential rates but hadn't applied the additional 3% SDLT rate, which HMRC argued should have applied. The FTT rejected HMRC's arguments and found that non-residential rates should have applied (thereby reducing the SDLT bill).
The definition of ‘dwelling’ for the purposes of the 3% supplement is "a building that is used or suitable for use as dwelling, or is in the process of being constructed or adapted for such use...".
