Recently HMRC has turned down a high number of claims for Stamp Duty Land Tax (SDLT) refunds made on the grounds that a property in need of repair was unsuitable for use as a dwelling.
Clayton & Brewill explains why these claims were turned down and what actually makes a property uninhabitable in the eyes of HMRC in this latest blog.
How does SDLT work?
SDLT is tax paid on purchase of property over a certain price in England and Northern Ireland. For residential properties it starts to apply at £125,000 or £300,000 for first-time buyers purchasing a residential property worth £500,000 or less. For non-residential land and properties, it starts at £150,000.
These thresholds were originally higher, but were lowered from 1 April 2025. From 31 October 2024, a higher 5% rate was applied on the purchase of additional properties.
Properties that can claim SDLT refunds
HMRC only views a small minority of properties likely to be considered ‘not suitable’ and therefore eligible for SDLT refunds. These are typically properties with structural problems so serious that they are dangerous to live in or work on.
A recent decision at the Upper Tax Tribunal underlined that:
- Being suitable for use as a dwelling is not the same thing as being ready for immediate occupation
- It is important to assess to what extent the building has the fundamental characteristics of a dwelling and is structurally sound
- The question to consider is whether the works of repair and renovation needed mean that the building no longer has the characteristics of a dwelling
What does NOT make a property unsuitable for use as a dwelling?
Contrary to popular opinion, HMRC believes that the following do not characteristics do not make a property unsuitable for use as a dwelling:
- Temporary removal of a bathroom or kitchen facilities before sale
- Substantial repairs needed to windows, floors or roofs
- Replacement boiler and pipework
- Unsafe electrical wiring
- The need to switch services back on
- Infestation by pets
- The need for damp proofing or damage to plasterboard
- Flood damage
Know the rules
While there are some occasions where a purchase is eligible for a SDLT refund, this is incredibly rare and there is always small print that needs to be taken into consideration. For example, if you buy an additional property before selling what was previously your main residence, you may be able to apply for a refund of this higher rate of SDLT.
At Clayton & Brewill, we understand how confusing HMRC rules regarding SDLT refunds can be; we can provide clarification about anything you are unsure about, to ensure you stay up to date with your tax payments. Contact us today for more information.
