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25 March 2019

A recent tax tribunal ruling has revealed a possible scenario where buy to let investors can avoid paying the 3% stamp duty surcharge – whilst offering an opportunity for many more who have already paid the charge, to request a refund from HMRC.

One of the most discussed recent charges to landlords, has been the 3% stamp duty charge, in place on the purchase of second homes, since April 2016.

However, a recent tax tribunal held in Bristol, suggests that certain property purchases may not be subject to the additional 3% surcharge, just the standard rate of stamp duty.

The case in point saw Paul and Nikki Bewley purchase a derelict bungalow in Western-supe- Mare, which was at the time uninhabitable.

The couple decided to demolish the original building in order to build a new property in its place, in the belief that they would not be liable for the 3% charge for purchasing a second home.

HMRC contested this and believed that the 3% stamp duty surcharge was applicable, on the grounds that a property was capable of being used as a dwelling sometime in the future.

However, a recent tax tribunal ruled against the HMRC claims, stating that the surcharge was only chargeable if the home was in suitable living condition immediately.

This judgment suggests that buy to let investors may have a case for exemption from the 3% surcharge, if buying a property that is uninhabitable at the time of purchase.

Specialist buy to let mortgage broker Commercial Trust Limited believes that potentially, this ruling could represent an opportunity for retrospective claims from buy to let investors who have paid the additional charge on properties that were uninhabitable at the time they were bought.

HMRC has yet to decide on an appeal, saying “We’re considering the judgment carefully.”