When buying a residential property in the UK, many conveyancing solicitors default to assuming that you should pay the residential rates of stamp duty. This is the case even if the property is in poor condition at the time of purchase, which might make it eligible for non-residential stamp duty rates, as was argued in the PN Bewley v HMRC case.
Stamp Duty Land Tax (SDLT) is a self-assessed tax. Many conveyancing solicitors prefer to avoid the risk of making an incorrect assessment. The general consensus among them is that if you wish to challenge the assessment, you should first pay the stamp duty and then seek a refund later.
It’s important to note that most solicitors view issues with SDLT as tax-related matters. As a result, they’ll often refer you to a tax specialist. However, when discussing property condition issues and their potential classification as non-residential based on the PN Bewley case, many tax specialists might admit they lack expertise in property condition evaluations.
Ultimately, SDLT is a self-assessed tax. If you provide a compelling argument to your solicitor, they might submit your self-assessment as non-residential for SDLT purposes. This approach is supported by both the PN Bewley and the Mudan v HMRC cases.
In both the Bewley and Mudan cases, the properties were self-assessed as non-residential, leading to investigations. Based on these cases, a prudent approach might be to allow your conveyancing solicitor to self-assess as non-residential and then reclaim any overpaid stamp duty later.