In Bemal Patel v HMRC [2025] TC09467, the First Tier Tribunal (FTT) found that a property undergoing conversion work at the date of completion was residential for Stamp Duty Land Tax (SDLT) purposes.
Bemal Patel (BP) purchased a partly completed development with planning permission to convert two properties into one five-bedroom house.
- BP submitted his Stamp Duty Land Tax (SDLT) return on the basis that the property was residential for SDLT purposes at the date of completion.
- Multiple Dwellings Relief (MDR) was claimed on the transaction with SDLT of £799,422 being paid.
- BP's agent subsequently submitted an Overpayment relief claim for £475,961 on the basis the property was non-residential when purchased.
- HMRC opened an enquiry into the overpayment relief claim, denying it and issuing a closure notice on the basis that:
- BP's original assessment of the property as residential was correct.
- MDR should not have applied to the purchase.
- Both parties engaged in Alternative dispute resolution but were unable to reach an agreement. BP appealed to the First Tier Tribunal (FTT).
BP accepted that if the FTT found the property to be residential then MDR could not apply, and HMRC's Discovery assessment would stand. Therefore, the only point relevant for the FTT to determine was whether the property was residential or not.
The FTT established that:
- The previous owner had begun conversion work on the properties but was later subject to a freezing order and the properties were then put on the market.
- The properties were marketed as 'a freehold part-complete residential development opportunity'.
- Existing floor plans already showed that access doorways between the two properties had been created.
- There was still a significant amount of work to be undertaken, and if BP was unable to finish it, he intended to sell the properties separately.
Residential property is defined in s.116 Finance Act 2003 as:
- A building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use.
- Land that is or forms part of the garden or grounds of a building within paragraph (a) (including any building or structure on such land).
- An interest in or right over land that subsists for the benefit of a building within paragraph (a) or of land within paragraph (b).
Non-residential property is any property that is not residential property.
The FTT found that:
- The correct approach was to determine whether the properties were in the process of being constructed or adapted for use as a dwelling when the transaction took place.
- For the building to be classed as residential, it must be undergoing adaptation when the purchase occurred. In this case, the conversion work was part way through.
- Since the 'finished building' did not yet exist, the 'suitability of use' test had to be determined in accordance with the information available, such as planning permission.
- A planning condition had been applied to the properties and once they were converted, that condition would need to be lifted before the property could be resided in.
- This planning condition did not alter the physical attributes of the building or its purpose. Regardless of the planning condition, the building would still be a dwelling house once finished.
- The building, on the effective date of the transaction, was in the process of being adapted for use as a dwelling, meaning it fell within the definition of residential property in s.116.
The appeal was dismissed.
Useful guides on this topic
SDLT: Stamp Duty Land Tax, start here
What is SDLT? What are the SDLT rates? What is exempt from SDLT? What reliefs are available? When are returns due? When can you amend a return?
SDLT: Residential property higher rates
A guide to the Stamp Duty Land Tax (SDLT) higher rate charge on residential property, when it applies and what reliefs are available to exempt buyers from the charge.
SDLT: At a glance, Stamp Duty Land Tax, rates and allowances
What is Stamp Duty Land Tax (SDLT)? What are the rates of Stamp Duty Land Tax (SDLT)?
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?
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