Investors avoid 3% stamp duty surcharge after court ruling

Ryan Bembridge

March 19, 2019

stamp duty

A couple who purchased an investment property they demolished for being uninhabitable have avoided paying the 3% stamp duty surcharge – setting a precedent for other developers.

Paul and Nikki Bewley bought a bungalow in Weston-super-Mare for £200,000 in January 2017, which was found to have issues with asbestos and central heating. The building was demolished with a new home being built in its place.

The ruling made in January by a First Tier Tax Tribunal in Bristol sided with the couple against the HMRC, ruling that they shouldn’t be liable for the surcharge because the property was not fit to live in.

Due to the ruling they only had to pay £1,500 in stamp duty rather than £7,500.

David Hollingworth, director of communications at L&C Mortgages, said the ruling was interesting but will only save investors cash when they are buying without a mortgage.

He said: “This case is bound to catch the attention of landlords eager to avoid a 3% stamp duty surcharge that applies to the purchase of additional properties.

“As interesting as it might be, the particular circumstances of this case would still suggest that it’s unlikely to offer a loophole that many landlords will be in a position to attempt to take advantage of.

“In this case the original property was in such need of repair and renovation that it was demolished, so this isn’t likely to offer those looking to refurbish a property before letting a way of sidestepping the additional stamp duty surcharge.

“The level of work required would no doubt rule a property out for mortgage purposes in any cases so this ruling may be something that developers or cash buyers are more likely to try to rely on.”

A HMRC spokesman confirmed that it won’t appeal against the ruling.

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