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  • Tax

    Legitimate way to avoid 3% SDLT surcharge



    A new legal ruling means there is now a legitimate way to avoid the 3% stamp duty surcharge on second homes not to mention the good news that property buyers could claim millions of pounds back from the taxman after a legal ruling found that uninhabitable properties should not be liable for the stamp duty surcharge on second homes.

    The extra 3 per cent tax has been imposed since April 2016 on properties bought in addition to the buyer’s main home.

    A tax tribunal heard in Bristol this month found in favour of Paul and Nikki Bewley, who bought a derelict bungalow in Weston-super-Mare for £200,000 as a buy-to-let investment in January 2017.

    It was riddled with asbestos and had no central heating. The couple demolished it and built a new home in its place.

    HM Revenue & Customs (HMRC) argued that a buyer should be liable for the higher rate of stamp duty if a property was capable of being used as a dwelling in the future, but the tribunal disagreed, saying that the charge should be levied only if the home was suitable for immediate habitation.

    Experts say that the case could open the door for hundreds of claims from buy-to-let investors who paid the additional charge for the purchase of properties that needed renovation and that many would also jump on the strategy of buying derelict properties, to avoid the surcharge.

    Full/source article 

    Just to reiterate,  the ruling means that by buying a property that is derelict or uninhabitable, buyers can avoid the stamp duty surcharge.

    According to the Housing Act of 1957, a property must have lavatory, cooking and bathing facilities to be considered habitable.

    HMRC may challenge this verdict, and also the definition of "uninhabitable" may become the subject of a legal battle - so watch this space!

    SEE ALSO  -          RICS urging Gov. to end S24 & SDLT surcharge

    UP NEXT -              Landlord Guide to Stamp Duty Surcharge

    DON'T MISS -         How to cope with the Stamp Duty surcharge

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    This is going to be a classic case of different branches of government picking different sections of law to argue all the sides of the same coin to suit that department.

    HMRC - it's not a burnt out shell with no roof- habitable

    Trading standards - its EPC F - not habitable.

    EHO - no central heating - cat 1 hazard - not habitable.

    So I would be interested in someone advancing this argument - if I buy a property for letting out - if I can't let it out then it's not habitable.

    The law says I can't rent it out if EPC 'F' or worse.

    The law says I can't rent it out if Category 1 HHSRS hazard ( and with the passing of the fitness for habitation bill maybe category 2)

    - actually there's a even better test ! - it's in the very name of the bill "Homes (Fitness for Human Habitation) Act 2018"  --- if it doesn't pass the tests in this act - then it ain't fit for habitation !!!???

    It would also seem to be an entirely legitimate use of the tax, since any tax serves a dual purpose of collecting revenue and discouraging behaviour we as a society have decided we don't want an encouraging things we do - and bringing unused property back into use to increase the total dwelling stock is currently something we want to encourage.

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    DISCLAIMER just my personal opinion - for legal advice consult a qualified professional grown-up.


    This would be great. We bought a house in  such bad condition we had the valuations office declare we didn't have to pay any council tax till we renovated it. Hoping to claim back the SDLT now.

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    Worth finding asbestos in the house, i.e. Artex ceilings and immediately uninhabitable I would think.  Try to say it is not!

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    As far as I am aware, it would be perfectly habitable whilst the asbestos is intact?

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    Maybe true but I specifically asked on the basis of the asbestos being damaged, their reply was clear and concise that any exposure of any asbestos whatsoever would render the house uninhabitable. No room for common sense.

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    Perfect use for the Precise mortgage product where you buy an unmortgageable property on bridging, do the work to make it mortgageable, and then revert to a BTL term mortgage - all in one seamless transaction.   Call the team at Property Tribes Financial Services on 01206 654444 to access this product.

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    There's an interesting commentary here on the case, which goes a lot further than the article linked above:

    Any future cases will hinge on whether a property is "suitable" for being used as a dwelling (which is seemingly a higher bar than "capable" of being used as a dwelling).

    However, I can already spot a downside of avoiding the SDLT surcharge by claiming a property is not "suitable" for use as a dwelling, which is that all money spent on subsequent repair would then have to be allocated as capital spend, and for most landlords it's preferable to allocate as much as is justifiable as revenue spend.

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    I suspect that a key point here may be that building land does not attract the 3% surcharge. And as the building was derelict and demolished, I guess it may have been argued that the land rate shuld apply.  I'd be surpriced (but financially interested) if a case was won where the property was not demolished but refurbished instead.

    A nice win!


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    Potentially, a perfect Refurb To Let project!

    For a ‘light refurb’, we can provide you with access to a brilliant 2-in-1 product strategy which brings together the flexibility of bridging finance, with an exit onto a long-term buy to let mortgage once the work has been completed.

    Not only does this give landlords the peace of mind that they have an exit, they can also rest assured that the price of the buy to let loan at offer will be the price they get on completion (providing there are no changes and the property meets the expected valuation following refurbishment).

    • One application form will produce two offers, one for the bridge and one for the buy to let
    • One expert underwriter from start to finish
    • The same valuer for both the initial valuation and the re-inspection
    • One conveyancer and discounted legal fees
    • Landlords can borrow up to 75% LTV on the bridge and up to 80% of the post works valuation on the buy to let mortgage helping to optimise cash flow
    • Bridging rates start from 0.49% per month and buy to let mortgage rates from 2.99%, 
    • No mortgage repayments are required whilst the refurbishment works are being completed

    For a ‘mid to heavy’ refurb strategy, we can provide you with access to numerous other deals similar to the above, and the rates and fees will depend on the amount of works carried out.  Bespoke quotes are available – ask us anytime for help and advice.

    The 3% surcharge has indeed put many property investors off, and if the court case above is feasible for you too (I am not a tax adviser, please take specific tax advice for all transactions) then this could possibly encourage many more investors to buy, add value, and refinance (leaving some or all of the money in) to further build your property wealth.

    If funding is required, and you want quotes for bridging, BTL, HMO and portfolio finance, call the https://www.PropertyTribesFinancialServices.com team on 01206 654 444 or email us at advice@ptfs.co.uk







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    Whoop whoop! Good news at last. Now to see if we can compose a letter to HMRC to claim back 11k, utilising Words in a favourable manner.

    Thanks all

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