SDLT Overpayment case study

Hillier Hopkins LLP

Chartered Accountants & Tax Advisers

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The question you need to ask yourself is, “would you live there?” If the answer is no then you may have an opportunity to claim overpaid SDLT.

In January 2019, the Courts decided the case of P N Bewley Limited in favour of the taxpayers.  The facts of the case would be viewed by anyone outside of HMRC to be blindingly obvious, but this didn’t stop HMRC arguing that the company concerned owed an extra £7,500 of SDLT on the purchase of a property.

Mr and Mrs Bewley set up a company and purchased a derelict bungalow for £200,000. It was severely dilapidated and had an extensive presence of asbestos.  Their intention was to demolish it and build a new property on the same site.

A SDLT1 return was submitted by the solicitors on the normal basis that the bungalow is a residential property and as the purchase occurred through a company the 3% higher rate charge was applied. The Bewley’s argued that non-residential rates should have been applied to the purchase on the basis that the bungalow was not inhabitable.

The evidence put before the Tribunal included professional reports, marketing material and photographs of the bungalow on the date of purchase. The photographs held particular significance and were key in the judgement.

Judge Thomas made an interesting comment in his judgement about the state of the bungalow “No doubt a passing tramp or group of squatters could have lived in the bungalow…”  Most of us would be gratified to see common sense prevail and Court ruled the bungalow was inhabitable.

As a result, the purchase was reclassified as non-residential, this resulted in a lower SDLT liability, and consequently the purchase was not subject to the additional 3% charge which is applicable to companies buying a residential property.

The Case was heard by the First Tier Tax Tribunal and although this Court does not create binding precedence, HMRC have not appealed the judgement.

What we should take away

The decision opens up an interesting opportunity for developers. Derelict and properties in need of serious work could potentially benefit from lower SDLT rates.

Obviously the facts of each purchase must be reviewed on its own merits as this does not mean that every property which requires refurbishment can benefit. But it does widen the window of opportunity.

If you have a property you are due to purchase or have purchased in the last 13 months, please do not hesitate to contact us to see if we can help lower your SDLT liability.

If you have any concerns please contact our expert below.

Do you need extra information?

Simon Cyna - Mixed Tax Senior at Hillier Hopkins

Simon has a vast amount of knowledge and experience covering all taxes but specialises in SDLT queries and general/advisory tax queries.

Contact Simon at or on +44 (0)1923 634 258

Based at the following office - Watford