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By remote video hearing
Appeal reference: TC/2022/02868
House in need of re-wiring and other renovation works before it could safely be occupied –
whether “suitable for use as a single dwelling” – paragraph 18, Schedule 4ZA Finance Act
2003 – yes – whether Table A in section 55 Finance Act 2003 the correct table to use to
calculate SDLT on acquisition – yes – appeal dismissed
Heard on: 6 March 2023
Judgment date: 28 March 2023
For the Appellant: Patrick Cannon of counsel, instructed by Cornerstone Tax 2020
For the Respondents: Christopher Vallis, litigator of HM Revenue and Customs’ Solicitor’s
1. On 5 August 2019 the Appellants (“Mr and Mrs Mudan”) purchased 14 Liskeard
Gardens, London SE3 (“the Property”) for £1,755,000. They paid £177,000 by way of stamp
duty land tax (“SDLT”) on that purchase on the basis that the Property was residential property.
2. On 31 July 2020 Mr and Mrs Mudan wrote to the Respondents (“HMRC”) to amend their
SDLT return to show that only £77,250 was due. This was on the basis that the Property was
not suitable for use as a dwelling, as it did not have basic living facilities, and so was not
residential property within the meaning of section 116(1) Finance Act 2003 (“FA 2003”1
). On
13 August 2020 a repayment of £99,750 was made to Mr and Mrs Mudan.
3. On 19 April 2021 HMRC opened an enquiry into the amended return and on 21 June
2021 HMRC issued a closure notice to Mr and Mrs Mudan under paragraph 23, Schedule 10,
recording their conclusion that the Property was suitable for use as a dwelling on the effective
date of the transaction and so constituted residential property. Accordingly, the amount of
SDLT chargeable was £177,000.
4. The question for me is whether the conclusion in the closure notice was correct.
5. FA 2003 imposes a charge to SDLT on the acquisition of a chargeable interest, which
includes an estate in land in England or Northern Ireland. The amount of tax chargeable is set
out in section 55 FA 2003. Section 55(1) provides that:
“The amount of tax chargeable in respect of a chargeable transaction to which
this section applies is determined in accordance with subsections (1B) and
6. Subsection (1B) applies to transactions which are not “one of a number of linked
transactions” whereas subsection (1C) applies to transactions which are. Both subsections refer
to Table A and Table B, which prescribe the rate of SDLT to be used. Table A is the appropriate
table “if the relevant land consists entirely of residential property” and Table B is the
appropriate table “if the relevant land consists of or includes land that is not residential
property.” The rates are higher (potentially much higher) in Table A than in Table B.
7. The meaning of “residential property” is found in section 116 FA 2003. Subsection (1)(a)
provides that residential property means: “a building that is used or suitable for use as a
dwelling, or is in the process of being constructed or adapted for such use…”
8. If the Property was a dwelling for the purposes of Schedule 4ZA on the effective date of
the transaction, this would be a higher rates transaction and Schedule 4ZA would substitute
Table A in section 55 with the table contained in paragraph 1(2) of Schedule 4ZA, effectively
increasing the normal Table A rates by 3%. Paragraph 18 of Schedule 4ZA sets out the “rules
for determining what counts as a dwelling” for the purposes of that Schedule:
“(2) A building or part of a building counts as a dwelling if –
(a) it is used or suitable for use as a single dwelling, or
(b) it is in the process of being constructed or adapted for such use.”
9. It is not disputed that, if it were a dwelling, the Property would be a single dwelling and
so there is no difference, at least so far as this appeal is concerned, between the definition of
“dwelling” in paragraph 18 of Schedule 4ZA and the definition of “residential property” in
1 All statutory references in this decision notice are to provisions of FA 2003
section 116(1)(a). The correspondence between Mr and Mrs Mudan’s agent and HMRC,
including the closure notice, referred to section 116(1)(a) rather than paragraph 18 of Schedule
4ZA, but the conclusion in the closure notice (that the Property was suitable for use as a
dwelling) is clear. The review conclusion letter used the correct statutory references, and
neither party made anything of the incorrect statutory references in the closure notice or the
correspondence leading up to it.
10. The question for me, therefore, is whether, on the effective date (the date of completion
in this case), the Property was “suitable for use as a single dwelling” within paragraph 18(2) of
Schedule 4ZA. HMRC say it was, whereas Mr and Mrs Mudan now say it was not.
11. Embedded in Mr Vallis’ skeleton argument were comments about the relevance and
admissibility of three reports which Mr and Mrs Mudan proposed to introduce. These are:
(1) an RICS building survey report (the “RICS Report”) by Arnold & Baldwin (a firm
of chartered surveyors) dated 13 April 2019 prepared following an inspection of the
property in March 2019;
(2) a Statement of Condition (“the Redline Report”) dated 20 July 2020 prepared by
Redline Construction Group Ltd (“Redline”);
(3) a survey report (the “Hanspal Report”) prepared by S Hanspal dated 30 September
12. At the beginning of the hearing I asked Mr Vallis whether he wanted to object to the
introduction of these reports. He replied that he did. Mr Vallis described Mr and Mrs Mudan’s
attempt to introduce these reports in evidence as “an attempt to introduce expert evidence by
the backdoor”. His comments about the reports were not entirely consistent with this position.
In relation to the Redline Report and the RICS Report, he said that neither document was
drafted for the purposes of litigation. They are not expert reports and their authors are not expert
witnesses. The authors were not planning to attend the hearing to be cross examined and the
reports do not contain statements of truth or comply with any other of the requirements of an
expert witness report. He was more critical of the Hanspal Report, which (he said) appears to
be tailored to this litigation. It also not an expert report. It does not comply with the
requirements for such and its author will not attend the hearing to be cross examined.
13. Mr Cannon objected to the lateness of this application, which was only made in terms
(rather than hinted at in Mr Vallis’ skeleton argument, which was only served 14 days before
the hearing) on the morning of the hearing. If Mr Vallis was concerned about the accuracy of
the reports, he could have asked for the authors to attend. Mr Mudan would explain what the
reports were in the course of his evidence. Mr Vallis’ attempts to have the reports excluded
was an “ambush” and the tribunal would be able to make up its own mind about the value of
these reports in the light of Mr Mudan’s evidence.
14. I refused Mr Vallis’ application. Although hinted at in his skeleton argument, the
application was only made in reply to the tribunal’s question. If he had real concerns about the
reports, he should have raised them earlier and, if necessary, the authors could have been
required to attend and answer questions about their reports. Moreover, the reports do not seek
to give expert evidence; they simply describe the condition of the Property. Mr Mudan could
explain what they are and the tribunal could then decide what weight to put on them.
15. Evidence as to the condition of the Property on the effective date was given by Mr
Mudan. In addition the three reports referred to above were in the hearing bundle along with
a number of photographs of the Property.
16. Mr Mudan gave evidence to the Tribunal and was cross-examined by Mr Vallis. He had
also previously provided a witness statement.
17. Mr Mudan began by setting out the timeline of his purchase and setting the three reports
(referred to above) in context. He said that he had first visited the Property in August 2018.
There were people living there at the time. He took his family to look at the Property and they
could see the potential. He went to visit it again in the spring of 2019. There were still people
living there, but he thought the people living there knew that they were going to be evicted and
they were very reluctant for Mr Mudan to visit. He said that they had ten dogs and there was
dog excrement in the house. It was at this point (in the spring of 2019) that the RICS Report
was commissioned. This was done before Mr Mudan exchanged contracts to purchase the
Property. As the report indicated, the Property was in a relatively bad state at the time, but it
had not been vandalised in the way it had been by the time of completion.
18. The purchase of the Property was completed on 5 August 2019. It had taken over a year
from the first viewing to completion. Mr Mudan said that this was because the Crown Court
was involved. There were some kind of possession proceedings, although Mr Mudan was not
aware of the details. The length of time it had taken to go through with the transaction meant
that Mr Mudan had had to renew his mortgage application.
19. Mr Mudan said that the occupiers had been evicted and the Property had been empty for
four or five months before completion. He thought that it had been vandalised during that
period. He described the condition of the Property when he went to visit on the afternoon of
the day of completion. He said the points of entry had been broken into both at the front and
the rear. In the kitchen there was unbearable smell. All the kitchen units and appliances had
been damaged and none of the utilities worked. They had been taped with tape telling people
not to use them. There were mouse and rat droppings in the kitchen and Mr Mudan recalled
seeing some mice running around.
20. Every room was a mess. The water, gas and electricity were not functioning safely. In
the boiler room, the boiler had been ripped off the wall and rainwater was coming into that
room, which also housed two water tanks and the hot water system.
21. Some of the bathrooms had been damaged, some more than others. Some of them were
in reasonable condition.
22. The family were only able to move in in May 2020, when enough work had been done
to make the Property suitable for a young family. There was still some more work to do and
this went on for a few more months.
23. Mr Mudan said that he had not been aware that he was able to claim a lower rate of SDLT
because of the state of the Property. He had been told about this later by a consultant. The
other two reports, the Redline Report and the Hanspal Report, were prepared after the event to
back up Mr Mudan’s claim for a reduced rate of SDLT. However, Mr Mudan confirmed that
both reports reflected the position at the effective date and what he saw when he first went into
the Property.
24. The Redline Report indicates that the electrics were a disaster. For example, there were
loose wires on the main fuse board. Redline had inspected the Property within the first ten
days of completion. As a result of Redline’s comments, the house was rewired completely,
with new wires, sockets and fuse boards throughout the house. Mr Mudan also had builders
ready to go and Mr Hanspal had been instrumental in the work. The Hanspal Report and the
Redline Report simply reflect what the authors saw at the time.
25. As far as Mr Hanspal’s report is concerned, he was a builder that Mr Mudan had used on
a number of occasions. Mr Mudan accepted that the report had been commissioned to backup
his SDLT claim, but Mr Hanspal had visited the Property on a number of occasions and his
report reflected the state of affairs at completion.
26. Mr Vallis asked Mr Mudan whether he thought that the Property could have been
vandalised after completion, but Mr Mudan said that what he was describing (and what the
reports reflected) was the state of the Property when he went in on the afternoon of the day of
completion. The photographs in the hearing bundle reflect the state of the Property.
27. Mr Mudan agreed that the Property was still residential in nature. It had been someone’s
house for many years and it was not falling down. Nevertheless, he did not consider that it was
safe to live in with a young family. This was so even though there was no structural damage
to the Property and no structural work was required except to replace the missing roof over the
boiler room. Mr Mudan was sure that there was a danger to life because of the state of the
electrics. He accepted that he had no experience of domestic electrical systems, but he relied
on Redline who told him that it was dangerous. Mr Vallis put it to Mr Mudan that he was
overplaying the dangerousness of the Property, but Mr Mudan said that, based on the items
identified by Redline, he would consider the Property was unsafe for a young family.
28. Mr Mudan agreed that a lot of the work that he had carried out was designed to make the
Property a nice family home, but work had been required to make it safe. He commented that
maybe about 20-30% of the total project costs were incurred on making the Property safe; the
rest was incurred on making the house a pleasant family home. He had been able to spend
more than he originally anticipated because of the SDLT refund. Mr Vallis put it to Mr Mudan
that he had a vested financial interest in the litigation, given that he had spent the SDLT refund.
Mr Mudan agreed that the claim was made after the event. Initially he had been reluctant to
make it, but the tax consultant had told him that he was within his rights, and he was surprised
(albeit pleasantly) when the claim was approved. He was then surprised (less pleasantly so)
when HMRC launched their enquiry. Nevertheless, Mr Mudan said, the point is that the
Property was not habitable when the purchase was completed.
29. Mr Mudan agreed that he had purchased the Property with the benefit of a mortgage and
the mortgagee had clearly been happy to lend on the security of the Property.
30. In answer to a question from the Tribunal, Mr Mudan explained that the works that had
been done to make the Property safe (as opposed to a pleasant place to live) was as follows:
(1) the electrical works of rewiring, with new switches, sockets and fuse panels;
(2) a new boiler, water pumps and pipes (works to gas as well as water – where the
boiler had been pulled away from the wall there were damaged pipes that could be leaking
and they had to be made safe) in the boiler house;
(3) a new roof over the boiler house designed to stop rainwater entering;
(4) broken windows were repaired and the Property made secure;
(5) The unbearable smell in the kitchen was cured by cleaning it out completely,
removing all the units (and with them the rotting food etc). This had got rid of the smell
and the vermin with it;
(6) The basement flooded to about six inches deep. There were some leaking pipes
behind the walls and the plumbers had had to redirect the water supply and tank the cellar
to some extent as water still came through when it rained. As a result of rainwater
entering, Mr Hanspal had suggested tanking the basement.
(7) Lots of rubbish had had to be cleared from the house and the garden. Several skips
had been needed to accomplish.
31. A number of photographs were included in the hearing bundle, particularly in the Hanspal
Report. They show damp in a wall in the exercise room, water penetration at roof level,
unusable sanitary fittings and electrical wiring, a significant amount of rubbish around the
Property and evidence of wilful damage (e.g. a ripped out fireplace). The text of the Hanspal
Report (which is largely a factual narration of what the author observed and the works
subsequently carried out rather than any expert opinion) and the appended pictures are all
consistent with Mr Mudan’s evidence.
32. Although Mr Mudan clearly has a financial interest in the outcome of this litigation (it is
hard to think of a litigant who does not), I found him to be a straightforward witness who
(particularly in answer to my question at [30]) did not strike me as exaggerating the state of the
Property. Based on his account of the state of the Property on 5 August 2019 and the factual
narrative in the Hanspal and Redline Reports (which are all consistent), I find as facts that, as
at the effective date, the Property:
(a) had been used relatively recently as a dwelling; and
(b) was structurally sound; but
(c) was not in a state such that a reasonable buyer might be expected to move in
straight away. I find that, before a reasonable buyer would consider the Property
was “ready to move into”, the following works would be needed:
(i) the Property would need complete rewiring;
(ii) a new boiler, pumps and gas and water pipes would be required in the
boiler house, so that the water system operated safely and the boiler house
roof would need fixing;
(iii) the leaking pipes in the cellar would need to be repaired or replaced;
(iv) the kitchen units and appliances would need to be stripped back to the
bare walls and replaced;
(v) broken windows and doors (including locks) would need repairing and
the Property made secure;
(vi) a lot of rubbish (inside and outside the house) would need clearing
33. Given that, on Mr Mudan’s evidence, some bathrooms were in reasonable condition (see[21]), I do not consider that works to bathrooms would be required before an occupier would
move in, nor do I consider that a reasonable occupier would require the cellar to be tanked
before moving in. A few inches of water ingress in cellars is not uncommon, indeed I have
lived with this myself; fixing this in most cases is a desirable rather than an essential task.
34. There was some disagreement between Mr Vallis and Mr Cannon about whether the test
to be applied was whether a reasonable occupier would expect to see certain work carried out
before they were prepared to move in (Mr Vallis’ formulation) or whether the focus should be
on this occupier (Mr Mudan and his young family, as Mr Cannon contended). The legislation
asks whether this building is suitable for use as a single dwelling and so, it seems to me, the
test must be applied by reference to the building only and without reference to the attributes of
any particular intending occupier. That is why I framed my conclusions in [32] and [33] the
way I did. In any event, I do not consider that any reasonable (sensible) person would be
prepared to occupy a house with potentially dangerous electrics, gas and water and a kitchen
in the state Mr Mudan described, and so I do not think I would have come to a different
conclusion (on the works an intending occupier would require) if I looked at Mr Mudan with
his young family rather than a hypothetical reasonable occupier.
35. For Mr Mudan, Mr Cannon said that the test to be applied was whether the Property was
suitable for occupation. He accepted that relatively minor disrepair was clearly not sufficient.
However, Mr Mudan’s evidence and the three reports and the photographs clearly show that
the Property was suffering from much more than relatively minor disrepair.
36. The extent and nature of the electrical defects posed a danger to life. The Property needed
to be rewired as a whole. The question posed by the Upper Tribunal in Fiander and by Judge
Helier in Fish Homes was whether ordinary people would say that it was too dangerous to live
in the Property. Cladding had not been considered to have that result. This is because the
dangerous cladding would make the Property more dangerous only in the event that fire broke
out. However, the dangerous electricity system meant that it was just not possible to move in,
certainly not with a young family. A positively dangerous electrical system is more serious
than inert, dangerous cladding.
37. The RICS Report does not paint a particularly bleak picture of the Property, but it is
important to remember that that was prepared in the spring of 2019 before the occupiers were
evicted and the vandalism began. The Redline Report provides a clear account of the electrical
system at the time of completion. Mr Vallis criticised Redline for not mentioning the
vandalism, but Mr Cannon said that their role was not to act as detectives. They simply
reported on the state of the electrics and did not speculate about how that state had come about.
38. At the date of completion the Property passed the threshold for not being suitable (safe)
for use as a dwelling. It was only made suitable for use as a dwelling by the works to the
electrics and, to a lesser extent, the other repair works (the boiler and the roof of the boiler
39. For HMRC, Mr Vallis said that the Property is a large detached house in a residential
street, as Mr Mudan agreed. It had previously been used as a dwelling. It was occupied until
April 2019 at least and then was purchased in August 2019. The sales brochure prepared in
2018 shows a very pleasant, well furnished property.
40. Against that background, HMRC submit that very serious, fundamental damage to the
Property would be needed to prevent it being suitable for use as a dwelling. As Fiander makes
clear, suitability is not equated with immediate readiness for occupation. Property can be in a
state of disrepair and still be suitable for use as a dwelling. This is particularly the case if it
has been used in the recent past as a dwelling. It is still suitable for use as such even though
certain things need fixing. For disrepair to prevent property being a dwelling it must be so
fundamental that the Property has effectively ceased to be a dwelling.
41. Fish Homes sets the bar very high. Faulty cladding (of the kind involved in Grenfell
Tower) is not sufficient to go over the threshold.
42. Bewley involved an essentially derelict building that had to be demolished. That in Mr
Vallis’s view is a good example of the sort of dereliction and damage that would take a property
over the threshold. The fundamental nature of the property in that case was affected the
asbestos and the state of the Property. It had to be demolished and could never be safely
43. The RICS Report does not point to anything particularly serious in this regard. Given
that Parliament intends a building in the course of construction to count as a dwelling, and
similarly one which is in the process of being converted from another use into a dwelling, it
would in Mr Vallis’s submission be very surprising if a building which was already
fundamentally a dwelling, but out of repair, ceased to be a dwelling just because works (even
sometimes serious works) were needed before the property could first be occupied.
44. I will look first at the authorities discussed before me.
45. The main question in Fiander & Another v HMRC, [2020] UKFTT 190 (TC) and [2021] UKUT 156 (TCC), was whether the way an annex was connected to the main house meant that
a property qualified for “multiple dwellings relief” for SDLT purposes on the basis that the
annex was a second dwelling. That issue does not concern us, but the question of disrepair also
arose and the Upper Tribunal had this to say about whether a building is “suitable for use as a
single dwelling” (at [48]):
“The word “suitable” implies that the property must be appropriate or fit for
use as a single dwelling. It is not enough if it is capable of being made
appropriate or fit for such use by adaptations or alterations. That conclusion
follows in our view from the natural meaning of the word “suitable”, but also
finds contextual support in two respects. First, paragraph 7(2)(b) [of Schedule
6B (Transfers Involving Multiple Dwellings) of FA 2003] provides that a
dwelling is also a single dwelling if “it is in the process of being constructed
or adapted” for use as single dwelling. So, the draftsman has contemplated a
situation where a property requires change, and has extended the definition
(only) to a situation where the process of such construction or adaption has
already begun. This strongly implies that a property is not suitable for use
within paragraph 7(2)(a) if it merely has the capacity or potential with
adaptations to achieve that status. Second, SDLT being a tax on chargeable
transactions, the status of a property must be ascertained at the effective date
of the transaction, defined in most cases (by section 119 FA 2003) as
completion. So, the question of whether the property is suitable for use as a
single dwelling falls to be determined by the physical attributes of the property
as they exist at the effective date, not as they might or could be. A caveat to
the preceding analysis is that a property may be in a state of disrepair and
nevertheless be suitable for use as either a dwelling or a single dwelling if it
requires some repair or renovation; that is a question of degree for assessment
by the FTT.”
46. The FTT had dealt with the question of disrepair as follows (at [56]):
“We note that the property was in some degree of disrepair at the time of
purchase (the heating was not working as the boiler needed replacing; there
were damp problems such that some of the flooring needed replacing). We
have considered if this meant it was not suitable for use as a dwelling as at
completion. We are clear that “suitable for use” does not mean “ready for
immediate occupation”. It would have been obvious to a reasonable person
observing the property on the completion date both that the property had been
used for dwelling purposes in the relatively recent past and that the things that
needed fixing – the boiler, replacement flooring – were not so fundamental as
to render the property unsuitable as a place to live. Hence, in our view, the
state of disrepair did not render the property unsuitable for use as a dwelling.”
47. In in PN Bewley Ltd v HMRC, [2019] UKFTT 65 (TC), the FTT held that a derelict
bungalow infused with asbestos was not a dwelling for the purposes of Schedule 4ZA because
it was not suitable for use as such. Addressing the suitable/not suitable borderline and having
observed (at [39]) that they “accept that dilapidation of a dwelling does not necessarily prevent
it being a dwelling”, the FTT commented (at [53]):
“No doubt a passing tramp or group of squatters could have lived in the
bungalow as it was on the date of purchase. But taking into account the state
of the building as shown in the photographs on Mrs Bewley’s phone with
radiators and pipework removed and with the presence of asbestos preventing
any repairs or alterations that would not pose a risk to those carrying them out,
we have no hesitation in saying that in this case the bungalow was not suitable
for use as a dwelling.”
48. The important point in Bewley is that the property was in need of renovation and, whilst
the asbestos did not prevent re-occupation, it meant that “renovation was not a feasible
proposition, because the asbestos would be disturbed” (see [45]); in order to be “suitable” to
be used as a dwelling, the property needed renovation, but this could not be done because of
the asbestos and the bungalow needed to be demolished.
49. Fish Homes Ltd v HMRC, [2020] UKFTT 180 (TC), concerned a taxpayer which
purchased a flat in a block which was covered in cladding similar to that used on the Grenfell
Tower block (in which there had been a disastrous fire exacerbated by the cladding). In light
of the Bewley decision, the taxpayer argued that the acquisition of the flat was not a residential
transaction because the danger created by the cladding meant that the flat was not suitable for
use as a dwelling. Judge Hellier posed the question:
“So when do defects in the building mean that it is not a dwelling or not
suitable for use as a dwelling? Where a building has all the facilities of a
dwelling – facilities for rest, sleep, storage, hygiene and the preparation and
consumption of food, what can render such a building not suitable for use as
a dwelling or cause it not to be a dwelling?”
Noting that people live in buildings built under earlier regimes, which do not comply with
modern building regulations, Judge Hellier considered that, by itself, a failure to comply with
building regulations was not enough, and then went on (at [62]) to observe;
“But I accept that some defects in what could otherwise be a dwelling or
suitable for use as such would mean that it is not so. Defects which make it
dangerous to live in fall within that category but such danger must in my view
be such that a reasonable person would say “it’s too dangerous to live there”.
Some risks to health and safety may fall into this category: high radioactive
pollution, the high probability of walls collapsing, and the kind of hazards
which would spur a local authority to issue a prohibition notice restricting the
use of the premises.”
50. It is clear that there is a degree of disrepair that will result in a property, which may
otherwise resemble and meet the requirements for (and indeed have been previously used as)
a dwelling, not being suitable for use as a dwelling. However, a significant degree of disrepair
is required. Although suitability is tested on the effective date, “suitable for use” on the
effective date does not mean suitable for immediate use and occupation (“ready to move in”)
on that date. There is, as it were, a margin of appreciation, a degree to which a property can
fall short of being ready for an occupier to move in without the property ceasing to be suitable
for occupation as a dwelling. Disrepair which can be cured (things which are not fundamental
but which need fixing, as the FTT put it in Fiander) is not enough, nor is it necessarily enough
that there is a feature of the property which makes it potentially more dangerous to inhabit than
one would normally expect (unsuitable and potentially dangerous cladding is the example from
Fish Homes).
51. It must be unrealistic to expect someone to live in the property in its current state (perhaps
because it is too dangerous or unpleasant to inhabit) and it must require more than
repair/renovation (the words of the Upper Tribunal in Fiander) or “fixing” non-fundamental
issues to make it suitable. If, as was the case in Bewley, the property could not realistically be
occupied in its current state and (albeit for different reasons) the relevant defects could not be
cured, so that demolition was the only way forward, the property will clearly not be suitable
for use as a dwelling. Other examples of sufficiently fundamental problems might include a
high risk of structural collapse or some other lack of physical integrity, such as the building
being radioactive. Examples of failings which are not sufficient include the need for a new
boiler, the heating system not working, damp problems or the flooring needing replacing.
52. I consider that there is considerable force in Mr Vallis’ point that the statute treats as a
dwelling a building in the course of being constructed or adapted for use as a dwelling. It does
the same, where the effective date of a transaction is the date of substantial performance, for a
purchase of a building (or part) which is to be constructed or adapted for use as a dwelling
under the terms of the contract under which it is acquired and where the construction or
adaptation has not begun by that time (so-called “off plan” purchases); paragraph 18(5) of
Schedule 4ZA. The statute counts as a dwelling any building which (as at the effective date)
is used or suitable for use as a dwelling, is in the process of being constructed or adapted for
such use or is to be constructed/adapted for such use by the seller. Put the other way round,
the only buildings which do not count as dwellings are those which do not exist or exist but are
not used and not “suitable” for use as dwellings, where the construction/adaptation works
required to construct or adapt them to be suitable as dwellings have not begun and where those
works (if they have not started) are not the seller’s responsibility. If part-constructed/adapted
buildings and a developer’s plans for a building can count as a dwelling, it would seem
surprising for a property which had recently been used as a dwelling and was fundamentally
capable of being so used again (there being no lack of structural or other physical integrity
preventing this) not to count as a dwelling because there are obstacles to immediate occupation,
even though those obstacles do not go to the physical integrity of the building and are capable
of being fixed without too much difficulty.
53. Pulling all of this together, I consider that a building which was recently used as a
dwelling, has not in the interim been adapted for another use and is capable of being so used
again (a building, such as the one in Bewley, the defects in which cannot be put right at all, will
not be capable of being so used) will count as a dwelling, even though it is not ready for
immediate occupation, unless the reason/s why it is not ready for immediate occupation are so
fundamental (being radioactive or at high risk of collapsing, for example) that the work
required to put these problems right goes beyond anything that might ordinarily be described
as repair, renovation or “fixing things” (examples of this sort of work being installing a new
boiler or heating system, damp problems or floors needing replacing).
54. I do not consider that the works I have found a reasonable buyer would require to be
carried out before they would consider that the Property was suitable for occupation (“ready to
move into”) given its state on 5 August 2019 (see [32] and [33] above) come anywhere near
that threshold. I accept that the state of the gas and electrics and aspects of the water supply
(including the need for a new boiler house roof) made the Property too dangerous for a
reasonable person to occupy immediately, but the works required to put those problems right
were not fundamental and were much closer to the new boiler/heating system/curing damp/new
flooring end of the spectrum than the radioactive house/dangerous structure/potentially
collapsing walls end. All the other problems and curative work (stripping and refitting the
kitchen, sorting out some damp, clearing rubbish and mending doors and windows) were less
significant than those items.
55. For the reasons set out above I have determined that, on 5 August 2019 (the effective
date of the transaction), the Property was suitable for use as a single dwelling and so counted
as a dwelling for the purposes of paragraph 18, Schedule 4ZA, FA 2003.
56. It follows that the closure notice was correct and this appeal must be, and is, dismissed.
57. This document contains full findings of fact and reasons for the decision. Any party
dissatisfied with this decision has a right to apply for permission to appeal against it pursuant
to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The
application must be received by this Tribunal not later than 56 days after this decision is sent
to that party. The parties are referred to “Guidance to accompany a Decision from the Firsttier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.
RELEASE DATE: 28 March 2023

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