Henderson Acquisitions Ltd v Revenue And Customs (STAMP DUTY LAND TAX - whether property was suitable for use as a dwelling)

Factual and Procedural Background

This appeal arises from a decision by HM Revenue & Customs (HMRC) dated 30 March 2020, which refused a claim for a refund of stamp duty land tax (SDLT) amounting to £12,350 made by the Appellant following the acquisition of a property on Bedford Road in The City on 26 August 2016. The Appellant, a company engaged in purchasing, renovating, and reselling domestic houses, acquired the property from the estate of its former owner who had died some time before the purchase. The property had been vacant during probate.

The Appellant paid SDLT on the basis that the property was residential and subject to the higher rates applicable to companies. Subsequently, the Appellant sought a refund on the grounds that the property was not suitable for use as a dwelling at the time of acquisition due to the extent and nature of renovation works required, relying on a prior First-tier Tribunal decision in a similar case. HMRC rejected the claim after enquiry, and the Appellant appealed to the First-tier Tribunal.

The hearing was conducted remotely by video with consent of the parties, and the Tribunal was provided with extensive documentary evidence, including photographs, floor plans, and expert opinions. The Tribunal found the Appellant’s director to be an honest witness and accepted his evidence regarding the condition of the property.

Legal Issues Presented

1. Whether the property was suitable for use as a dwelling on the effective date of the transaction (26 August 2016) for the purposes of SDLT under the Finance Act 2003.

Arguments of the Parties

Appellant's Arguments

• The Appellant relied exclusively on the First-tier Tribunal decision in Bewley, where a property was found unsuitable for use as a dwelling due to dereliction and the need for demolition, arguing that similar extensive repairs and defects at the property rendered it unsuitable for use as a dwelling.
• The claim was supported by an expert opinion stating that due to roof leaks, damaged plasterwork, partial rebuilding of internal walls, defective heating and electrics, and other consequential works, the property did not meet the statutory definition of residential property.
• The Appellant accepted that only the structural works related to joist replacement and collapsed ceiling were relevant to suitability, as other works such as rewiring and central heating replacement were not sufficient to render the property unsuitable.

Respondent's Arguments

• HMRC argued that to be unsuitable for use as a dwelling, a property must be derelict and require demolition; mere need for renovation or repair does not suffice.
• The property had been previously occupied as a dwelling despite defects, and the presence of Acrow props to support damaged joists did not render the building structurally unsafe or unsuitable for use as a dwelling.
• HMRC relied on the Upper Tribunal judgment in Fiander and Bower, which held that replacement of heating systems and similar repairs do not render a property unsuitable for use as a dwelling.

Table of Precedents Cited

Court's Reasoning and Analysis

The Tribunal began by interpreting the statutory phrase "suitable for use as a dwelling" in light of the purpose of SDLT provisions, which is to tax residential property acquisitions at higher rates than non-residential properties, with further distinctions for companies and second homes.

It was noted that suitability is not equivalent to immediate habitability or readiness for occupation, but rather whether the property can be used as a dwelling in a general sense. The Tribunal emphasized that minor or moderate disrepair or the need for renovation does not negate suitability.

The Tribunal distinguished the present case from Bewley, where the property was derelict and required demolition, rendering it unsuitable for use as a dwelling. Here, the property was structurally sound overall despite some damaged joists and a collapsed ceiling affecting less than half the floor area.

Essential dwelling facilities such as cooking, sleeping, and hygiene were present, albeit some were unserviceable but repairable. The need for works such as rewiring, central heating replacement, replastering, and redecorating were not sufficient to render the property unsuitable.

The Tribunal accepted the Appellant’s concession that only the structural damage was potentially relevant but found that even this did not amount to unsuitability under the statutory test. The reasoning was consistent with the Upper Tribunal’s guidance in Fiander and the First-tier Tribunal’s findings in Mudan and Fish Homes.

Accordingly, the Tribunal concluded that the property was suitable for use as a dwelling at the time of acquisition and that the SDLT paid was correctly calculated.

Holding and Implications

The appeal is dismissed.

The Tribunal held that the property was suitable for use as a dwelling on the effective date of the transaction, thereby affirming that the SDLT originally paid by the Appellant was correct and no refund was due. The decision clarifies that properties requiring renovation, including structural repairs and replacement of facilities, do not automatically lose their status as residential dwellings for SDLT purposes unless they are effectively derelict and require demolition. No new legal precedent was established beyond the application of existing authorities.