SDLTM00385 - Scope: what is chargeable: land transactions: Residential Property鈥� 鈥� Not suitable for use as a dwelling (uninhabitable dwellings)
A very high proportion of the SDLT repayment claims that HMRC receives in relation to this area are wrong. Customers should be cautious about being misled by repayment agents into making incorrect claims.
Whether a property has deteriorated or been damaged to the extent that it no longer comprises a dwelling is a question of fact and听will only apply to a small minority of buildings.
If the building was used as a dwelling at some point previously, it is fundamentally capable of being so used again (assuming there is no lack of structural or other physical integrity preventing such use). Such a building is likely to be considered 鈥渟uitable for use as a dwelling鈥�, even if not ready for immediate occupation at the time of the land transaction.听
A property might not be considered 鈥渟uitable for use鈥� as a dwelling (sometimes referred to as uninhabitable)听when any required repair or renovation works mean that the property no longer has the fundamental characteristics of a dwelling.听听
There is a clear distinction between a derelict property and a dwelling that is听in need of modernisation, renovation or repair, which can be completed without first addressing structural defects that would make the property dangerous to work on and/or live in.
Examples of repairs, renovations and issues that will not make a property unsuitable for use as a dwelling include, but are not limited to:
路听听听听听听 The temporary removal of bathroom or kitchen facilities before sale.
路听听听听听听 Substantial repairs required to windows, floors, or a roof.
路听听听听听听 Replacement boiler and pipework.
路听听听听听听 Unsafe electrical wiring.
路听听听听听听 The need to switch services back on.
路听听听听听听 An infestation of pests.
路听听听听听听 Damp proofing required or plasterboard damage.
路听听听听听听 Flood damage.
路听 听 听 听Structural defects that can be repaired/rectified.
These are all common issues which can be fixed and do not prevent the building from fundamentally still being a dwelling. They do not constitute鈥痵tructural changes to the dwelling that would mean the building is no longer suitable for use as a dwelling.听
Tribunal Decisions
The Upper Tribunal has considered suitability for use as a dwelling in the appeal of Mudan [2024] UKUT 00307.听This听decision confirms HMRC鈥檚 longstanding position, set out above.听The Mudan case is subject to appeal to the Court of Appeal.听
The Upper Tribunal found that:听
There should be a focus on the 鈥渇undamental characteristics鈥� and nature of a听building over听a period of time, rather than a snapshot of habitability at the effective date. Suitable for use as a dwelling does not mean ready for immediate occupation.听听
Determining听whether or not a property is suitable for use as a dwelling requires a multi factorial assessment. The extent of repairs / renovation required is only one factor.听
Where a building has previously been used as a dwelling,听that will be a highly relevant factor.听
You should assess the extent to which the building has the fundamental characteristics of a dwelling, including the extent to which it听is structurally sound.听听
Identify and assess the impact of the necessary works collectively. Distinguish between works needed to render a building habitable, and those to make it pleasant to live in.听
There should be an assessment of whether defects in a building require works that are capable of remedy, taking into account听whether those works would be so dangerous or hazardous as to prejudice their viability or they would prejudice the structural integrity of the building.听听
The question to consider when repairs / renovations are required is whether those works have the result that the building no longer has the characteristics of a dwelling.听
Several First-tier tribunal decisions have also considered the issues here:
路听听听听 Henderson Acquisitions Ltd [2023] UKFTT 739 (TC)
路听听听听 Mudan [2023] UKFTT 317 (TC)
路听听听听 Fish Homes Ltd [2020] UKFTT 180 (TC)
路听听听听 PN Bewley Ltd [2019] UKFTT 65 (TC)