Whilst this was originally meant to deter second home buyers and buy-to let landlords from buying up properties and to ease the path for first-time buyers, the new rules caught far more than that and were very complicated. In particular, there was no exemption for developers buying houses to either re-develop or renovate.
This additional tax only applied to a purchase including a 'dwelling'. For example, if a developer purchased a tired, run down house with a large garden for £2m, they would have to pay an extra £60,000 in tax above what would have to be paid if only a garden (with no dwelling on it) was purchased. This has led to some developers arranging for sellers of residential properties to demolish the dwelling before completion of the purchase.
A grey area until now, what the word 'dwelling' actually means has been clarified in a recent case.
A demolition survey identified asbestos materials in a bungalow and recommended their urgent removal. The heating system had been removed and the survey involved breaking through walls and floors. The bungalow was still connected to water, electricity and gas services. Was this a 'dwelling'?
The tribunal decided that the building was unsuitable for use as a dwelling. The fact that it could be lived in by tramps or squatters, or could be renovated to be used as a dwelling was irrelevant. The tribunal considered that the amount of SDLT that HMRC had levied was wrong and ordered a large refund to be made to the buyer.
This article first appeared in the Watford Observer.