In Amarjeet and Tajinder Mudan v HMRC [2024] UT307, the Upper Tribunal rejected a claim that a property was too dilapidated and vandalised to make it suitable for use as a dwelling. Despite its poor condition, it remained 'residential' at the time of purchase for Stamp Duty Land Tax (SDLT).
- Mr Mudan purchased an empty property that required substantial work to make it suitable as a home for his family.
- It was purchased with the benefit of a residential mortgage secured on the property.
- Works completed after purchase included rewiring, a new boiler, replacing windows and tanking the basement.
- The taxpayers paid SDLT at residential rates and later Amended their SDLT return to claim a refund of SDLT on the basis that the property was not fit for human habitation and was non-residential at the time of purchase.
HMRC rejected that argument.
- On appeal, the First Tier Tribunal (FTT) agreed with HMRC: it concluded that the house was suitable for use as a dwelling and therefore was a residential property.
The taxpayers Appealed to the UT on the basis that the FTT had made an error of law in failing correctly to interpret and apply the test of whether the property was “suitable for use as a single dwelling”.
- They argued that the correct test was whether the building was suitable for occupation as a place to live on the effective date.
- For HMRC it was demonstrated that parliament's original intention in drafting a description of Residential property for SDLT was to ensure that residential properties in a poor condition, for example, former squats sold off by London councils, would remain residential and that the FTT had applied the correct tests.
Discussion then moved on to the assessment of the amount of work that might be required in making a property habitable and whether a property that was formerly residential could become non-residential due to neglect.
Looking at the FTT's findings, the UT decided that it was clear that the property had been and always was suitable for use as a dwelling, it just needed repairs, this fitted into the scheme of the legislation and as such the FTT had applied the correct tests and the appeal was dismissed.
Editorial comment
The tests applied by the courts can be summed up as 'One a residence nearly always a residence'... or nearly. The definition of residential property does not just rest with 'suitable for use' of course. We analyse the essential qualities of a residential property and a dwelling in our guide SDLT: Residential Property & Dwellings.
Useful guides on this topic
SDLT: Residential property & dwellings
What is residential property for Stamp Duty Land Tax (SDLT)? What tax rate applies? What garden and grounds are subject to higher rates of SDLT?
SDLT: Amending returns
How do I amend an SDLT return? When can I amend an SDLT return? How do I claim and SDLT refund? How do I deal with contingent consideration?
How to appeal an HMRC decision
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?
SDLT: At a glance, Stamp Duty Land Tax, rates & allowances
What is Stamp Duty Land Tax (SDLT)? What are the rates of Stamp Duty Land Tax (SDLT)?
External links
Amarjeet and Tajinder Mudan v HMRC [2024] UT307
Return to Ross Martin Tax: SME Tax News 10 October 2024
