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 UKFTT 0065 (TC)
STAMP DUTY LAND TAX – bungalow and plot of land acquired with planning
permission for demolition and building of new dwelling on site – whether higher
rates of SDLT in Schedule 4ZA FA 2003 apply – whether bungalow building
“suitable for use” as a dwelling on date of transaction – held not so suitable –
self-assessment as amended by HMRC reduced to remove higher rate charge and to
reflect non-residential rate.
P N BEWLEY LTD Appellant
– and –
THE COMMISSIONERS FOR HER
REVENUE & CUSTOMS
TRIBUNAL: JUDGE RICHARD THOMAS
Sitting in public at Civil & Family Justice Centre, Redcliff St, Bristol on 9 January
Mr Paul and Mrs Nikki Bewley, directors, for the Appellant
Ms Helen Davies, litigator HM Revenue and Customs, for the Respondents
1. This was an appeal by P N Bewley Ltd (“the appellant”) against the amendment
of a stamp duty land tax (“SDLT”) return made by them on 8 February 2017. The
amendment was made by Mr Joel Lord, an officer of the respondents (“HMRC”) and
was notified to the appellant in a letter of 26 January 2018 giving the officer’s
conclusion of his enquiry into the return. The amendment increased the SDLT payable
from £1,500 to £7,500.
2. The return related to the purchase by the appellant of Rosemount, Hillcote,
3. Our bundle contained the SDLT1 return, the correspondence between the officer,
Mr Lord, and the appellant’s solicitors, and several substantial documents appended to
the correspondence. It also included some black and white photocopies of photographs
of the building in question, which were difficult to examine, but we were immensely
helped by Mrs Bewley showing us the originals on her mobile phone, from which we
were also able to confirm the date they were taken.
4. Mr and Mrs Bewley gave us oral evidence in explanation of the photographs and
other documents and of their actions before the purchase. We accept their evidence
without any reservation.
5. In this section we make findings of fact from the documentary and oral evidence.
The existing building at Rosemount
6. From a notice of decision issued by North Somerset Council on 18 February 2016
to Mr R Cooke, the then freehold owner of Rosemount, we find that the description of
Mr Cooke’s application for planning permission was:
“Demolition of existing dwelling and erection of replacement building”
7. We find from the evidence of Mr Bewley that the bungalow at Rosemount had
been occupied by an elderly lady but the she had moved out in 2014 or earlier, some
time before their purchase.
8. From a demolition survey issued on 13 December 2016 commissioned by the
appellant and prepared by Philip Love of Enfield Group Ltd we find that:
(1) Asbestos-containing materials had been identified during the Demolition
(2) The asbestos materials identified were in “good condition” with risk scores
of 3 to 6 (out of 10). The recommendation for these materials was “urgent
(3) “Building Notes” showed that the heating system had been removed and
the remains of hessian insulation was still under the floor boards.
(4) The survey was a “disruptive, fully intrusive survey that involves
destructive application techniques …. involving breaking into floors, through
walls voids ceilings …”.
(5) Asbestos materials might remain identified buried in the fabric.
9. From a survey, which was not a building survey, made by Andrew Forbes,
Chartered Valuation Surveyors, and dated 16 November 2016 on behalf of Lloyds Bank
in connection with the appellant’s application for finance to build a new dwelling on
the site of Rosemount, we find that the executive summary of the survey said that there
was a building on the site described as a “derelict bungalow to be demolished”.
10. In the survey itself under the heading “property” the description was:
“The existing property is a derelict bungalow in poor internal condition,
which we understand is to be demolished …”
11. They add that “we understand that the building is connected into the following
services” and they show “Yes” against water, drainage, electricity and gas.
12. Under “Condition and State of Repair” they say:
“The existing property is in a poor state of repair and condition and will
be demolished …”
13. Chrysotile (white asbestos) was found in floor tiles, celling panels, wall panels
behind plasterboard, the soffit roofline, roof slates, the roof void and in the outer wall
14. A letter of 19 February 2018 from the appellant to HMRC making its appeal said
that while HMRC had researched the property (on the internet) and found that it was
being marketed as an “ideal refurbishment project” in September 2014, the agent’s
details did not contain any photographs of the condition of the property at the time and
the property had been left empty and deteriorated since then, not being habitable due to
the removal of the heating, copper pipes and floorboards.
15. They added that any refurbishment would mean disrupting the asbestos, and in
support enclosed an email from Chris Penny of R M Penny (Plant & Demolition) Ltd,
the demolition contractor for the bungalow, to Mrs Bewley dated 26 January 2018 said:
“the former dwelling known as Rosemount was constructed circa 1950
using a typical prefabricated panel system which was common at the
time comprising a timber frame and asbestos cement infill panel. …
Living in a home with intact asbestos does not necessarily pose a health
risk but these materials do deteriorate over time and when disturbed or
damaged asbestos fibres can be released into the air … to successfully
remove the asbestos cement materials from the dwelling necessitated in
the structure being virtually dismantled in the process and therefore left
16. We are satisfied from the photos we saw dated November 2016 that the
appellant’s description in this letter was correct. We asked Mr Bewley about the
demolition survey’s reference to services being still connected, such as water. He said
that this was correct though water had been turned off outside the building.
The return and the enquiry
17. On the return (SDLT1):
(1) The contract date and completion date are both shown as 24 January 2017.
(2) The “type of property” is Code 01, which according to the Notes for
Guidance in completing the return covers a “building used or suitable for the use
of a dwelling”.
(3) The consideration was £200,000.
(4) The “Tax Assessed” printout from the SDLT1 does not show any tax
assessed or indeed any entries except property type 01.
(5) The date the return was received by HMRC was shown as 9 February 2017.
18. On 8 November 2017 Mr Joel Lord, an officer of HMRC, opened (in time) an
enquiry into the return under paragraph 12 Schedule 10 Finance Act (“FA”) 2003. A
letter to the appellant’s solicitors, Lyons, was apparently sent the same day seeking the
answer to certain questions, but we do not have a copy of the letter in the bundle.
19. On 16 November 2017 Lyons replied to say they were seeking their client’s
authority to release the information requested.
20. On 22 November 2017 Lyons provided what had apparently been requested, the
contract and completion statement, the amount of the consideration, the Land Registry
transfer and details of the land purchased. Lyons said that the clients had told them that
the building in place was not capable of being a dwelling and they attached the
21. On 7 December 2017 Mr Lord replied to Lyons (copied to the appellant) with his
findings from his review of the information supplied. He said that based on the
information the transaction met all the conditions in paragraph 4 Schedule 4ZA FA
2003 which made it a chargeable transaction for the purpose of that paragraph and so
the higher rates of stamp duty were payable. He calculated the revised amount payable
as £7,500 (being 3% of £125,000 and 5% of the remaining £75,000) compared with
£1,500 shown on the return and paid.
22. He also mentioned penalties and sought answers to questions about Lyons’
actions in submitting the return (and he sent the appellant Factsheets FS7a and FS9).
23. Lyons replied to the penalty questions on 20 December 2017 to the effect that
they were aware of the higher rates of SDLT and that they had informed the appellant
of them, but they refused to disclose the appellant’s response without their permission.
On 10 January 2018 they gave the appellant’s response which was the property was not
24. They also submitted the lender’s valuation report, the email from Chris Penny
and the vendor’s planning permission to HMRC.
25. On 26 January 2018 Mr Lord gave his conclusion of his enquiry, that additional
SDLT of £6,000 was due and that he had amended the return accordingly, and the
amount was payable. The appellant was informed of their appeal right, within 30 days
of 26 January. This letter also informed the appellant that HMRC had decided not to
charge a penalty.
26. On 19 February 2018 the appellant appealed against the amendment to their
return, repeating their view that the property was not habitable at the time of purchase
and unviable as a renovation or refurbishment. Mr Lord gave his view of the matter
and said that his decision had been referred for review (although he had not offered one,
nor had the appellant requested one).
27. On 20 April 2018 Lesley Turner, an officer of HMRC who reviewed the decision,
said that her conclusion was that the “determination” listed should be upheld. That was
said to be a “determination” in the amount of £6,000, but what paragraph 36E Schedule
10 FA 2003 required her to do was to uphold HMRC’s view of the matter.
28. On 5 June 2018 the appellant notified their appeal to the Tribunal.
29. The charge to the higher rates is in Part 1 Schedule 4ZA FA 2003:
“Part 1 Higher Rates
1(1) In its application for the purpose of determining the amount of tax
chargeable in respect of a chargeable transaction which is a higher
rates transaction, section 55 (amount of tax chargeable: general) has
effect with the modification in sub-paragraph (2).
(2) In subsection (1B) of section 55, for Table A substitute—
‘Table A: Residential
Relevant consideration Percentage
So much as does not exceed £125,000 3%
So much as exceeds £125,000 but does not
exceed £250,000 5%
So much as exceeds £250,000 but does not
exceed £925,000 8%
So much as exceeds £925,000 but does not
exceed £1,500,000 13%
The remainder (if any) 15%’”
30. Part 2 sets out what a higher rates transaction is:
“2(1) This paragraph explains how to determine whether a chargeable
transaction is a “higher rates transaction” for the purposes of paragraph
(2) In the case of a transaction where there is only one purchaser,
determine whether the transaction falls within any of paragraphs 3 to 7;
if it does fall within any of those paragraphs it is a “higher rates
transaction” (otherwise it is not).”
31. Paragraph 4 is the paragraph that HMRC say applies here:
“4 A chargeable transaction falls within this paragraph if—
(a) the purchaser is not an individual,
(b) the main subject-matter of the transaction consists of a major
interest in a single dwelling, and
(c) Conditions A and B in paragraph 3 are met.”
32. Those conditions A and B are:
“(2) Condition A is that the chargeable consideration for the
transaction is £40,000 or more.
(3) Condition B is that on the effective date of the transaction the
(a) is not subject to a lease upon which the main subject-matter of
the transaction is reversionary, or
(b) is subject to such a lease but the lease has an unexpired term of
no more than 21 years.”
33. Paragraph 18 says what counts as a dwelling in the Schedule:
“18 (1) This paragraph sets out rules for determining what counts as a
dwelling for the purposes of this 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.
(3) Land that is, or is to be, occupied or enjoyed with a dwelling as a
garden or grounds (including any building or structure on that land) is
taken to be part of that dwelling.
(4) Land that subsists, or is to subsist, for the benefit of a dwelling is
taken to be part of that dwelling.
(7) A building or part of a building used for a purpose specified in
section 116(2) or (3) is not used as a dwelling for the purposes of
subparagraph (2) … [there is no such relevant purpose]
34. HMRC say:
(1) In Part 4 FA 2003 “dwelling” takes its ordinary meaning, and they say they
cite the Oxford English Dictionary and the National Census.
(2) That ordinary meaning does not require the property to be mortgageable,
meet the better homes standard or to be of standard construction, and a dwelling
does not change its nature because it falls into dilapidation.
(3) The building came within the meaning of “residential property” for the
purposes of s 55 FA 2003 because it was not excluded by s 116 FA 2003; the plot
was a residential plot in a residential area; and the intention was at all times for
the plot to continue to be a residential plot comprising a dwelling and its grounds.
(4) A building under construction for use as a dwelling comes within the
(5) The appellant used a code on the SDLT return which identified it as
(6) The fact that no buyer could be found to refurbish it did not mean the
property ceased to be a dwelling or was not capable of being renovated and
occupied as a dwelling.
(7) The planning permission was indicative of the intention that the property
was to remain a residential property. This “course of action” was a commercial
decision, and does not indicate that the existing property was not capable of being
utilised as a dwelling.
(8) The presence of asbestos in the existing building did not prevent its
renovation or reoccupation, as the critical risk would come during demolition.
35. In their appeal to HMRC the appellants grounds of appeal were that the property
was not habitable and refurbishment was not viable because of the asbestos content.
36. In their notification to the Tribunal they repeated this and said that they had
provided evidence that the property was not capable of being used as a dwelling. They
pointed to the valuation report and the demolition survey report, and added that the
property had no form of heating, old electrics, the kitchen and bathroom were dated and
the building was in poor condition in general. Any renovation would have been
extensive and would have disturbed the asbestos. It would not comply with the Decent
Homes Standard and would be unmortgageable because of the prefabricated
construction method with timber frame and asbestos cement infill panels.
Making sense of HMRC’s submissions
37. On several occasions during HMRC’s submissions on the case we found
ourselves wondering what the relevance of the point being made was. We still do
wonder, and so in an effort to assist HMRC in similar cases in future we make these
38. We agree with point (1) of their submissions, but not that any definition given to
39. We agree with point (2). We also accept that dilapidation of a dwelling does not
necessarily prevent it being a dwelling, though we are not clear what HMRC mean by
“change its nature”.
40. We agree with (3) insofar as the building is “residential property” within the
meaning in s 116(1)(a) and is not excluded by s 116(3). But the building was not a
residential plot whether in a residential area or not and the intention of the purchaser is
not relevant to anything in Schedule 4ZA FA 2003.
41. We agree with (4) that such a building is within s 116(1)(a). It is also a dwelling
within the provision relevant to this case, paragraph 18 Schedule 4ZA. But on the date
of completion no building was under construction, so the point is not relevant.
42. As to (5), indeed it did. HMRC say it used the wrong code: it should have used
04 which is also “residential”. But so what?
43. As to (6) whether it could be renovated and occupied as a dwelling is not relevant.
The test set out clearly in paragraph 18(1)(a) Schedule 4ZA is whether it was “suitable”
to be used as a dwelling at the time of purchase: it is not whether it was capable of
becoming so used in the future.
44. The planning permission obtained by the vendor in 2016 (see (7)) is equally
irrelevant. The building did not remain a residential property, and in any case the
planning permission was to demolish and construct a new building, which is what was
done, though again anything done after the purchase is irrelevant. We do not know
what HMRC intended to signify by “course of action” or why the question whether it
was a “commercial decision” affects anything. Are HMRC saying that they would not
have queried the SDLT return if the purchaser had not been a builder? The last clause
of (7) is the closest HMRC come to actually addressing the question in issue: was the
building suitable to used as a dwelling, which however is not, as we hold later, the same
as being capable of being a dwelling.
45. As to (8) we agree that the asbestos did not prevent re-occupation, but again that
is not the test. And renovation is irrelevant as it was not renovated at the time of
purchase, and we accept Mr Bewley’s evidence that renovation was not a feasible
proposition, because the asbestos would be disturbed (as the demolition survey said).
46. The submission by HMRC took as its starting point HMRC’s description of the
point at issue, which was whether the acquisition of the property comes within the
definition of “residential property” in s 116 FA 2003. This is where they go wrong, as,
leaving aside the ungrammaticality (the point is whether the property acquired comes
within a given definition), the issue is whether the building is suitable to be used as a
dwelling and so falls within paragraph 3(3) Schedule 4ZA where “dwelling” has the
meaning given in paragraph 18 Schedule 4ZA. We are not called upon to construe the
words “residential property” or examine s 116 FA 2003 except where paragraph 18(7)
requires it, which in this case it does not.
47. The word “suitable” does not appear in HMRC’s statement of case. This is
surprising as the correct test was considered by the reviewing officer (even though she
also referred to s 116 FA 2003 instead of paragraph 18 Schedule 4ZA). In the end we
have decided to take parts of HMRC’s submission in (7) and (8) to be that the building
was suitable to be used as a dwelling at the time of purchase and to ignore the rest.
48. We also think that some of the appellant’s arguments miss the mark, but that is
understandable as by the time of the notification of the appeal they were no longer
represented. We have taken their submission to be that the building was not at the time
of purchase suitable for use as a dwelling, and that that is supported by their evidence.
49. We should also clarify one point made during the hearing by HMRC. In seeking
to rebut the appellant’s claim that the building was not mortgageable, Ms Davies
referred to the contract between the appellant and Mr Richard Cooke, the seller to the
appellant as freehold owner of Rosemount. The contract had been included in the
bank’s surveyor’s report and referred, against the wording “…ct rate”, “4% above the
base rate of Lloyd’s Bank plc.” Ms Davies said that this showed that the building was
indeed mortgageable as the appellant had obtained a loan on the security of it with that
50. Mr Bewley explained that the interest rate was simply the rate in the purchase
contract that would apply if payment of the price was late. The loan was not secured
on the existing building and the bank knew that it was to be imminently demolished.
We accept Mr Bewley’s evidence on this, but the fact that it was not mortgaged by the
appellant does not mean that it was not mortgageable at all, though as we have said the
question of mortgageability is not really relevant to our decision.
51. The sole issue for us is whether the bungalow, which is undoubtedly a building,
was, at the date of completion, suitable for use as a single dwelling. That it was not at
that date used as a dwelling is not in dispute. Nor is there any dispute about whether it
was a single dwelling.
52. We start by approaching this issue by looking only at the words of paragraph
18(1) Schedule 4ZA FA 2003 – “used or suitable for use as a single dwelling”. The
“used as” test at a single time is a clear binary issue – either the building was on
completion date used as a dwelling or it was not. For buildings that were not so used
on the completion date it would be possible to have a yes/no test: eg had its last use
been as a dwelling, or if never used was it designed for use1 as a dwelling? But the test
is not like that – it asks the single question: was it “suitable” to be used as a dwelling?
There could have been other descriptions used: eg whether it was capable of being used
as a dwelling. It seems to us that the legislation contemplates that there must be and is
a class of buildings that might not meet the test and the likely class is those which are
capable of being a dwelling but which are unsuitable for that purpose. The question
then is where is the suitable/not suitable boundary.
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.
54. We wish to stress that in this case the Tribunal has used the expertise of its
non-legal member. Mr Haarer is a retired chartered surveyor and his immediate
reaction after the end of the hearing was that the building was not suitable for use as a
dwelling in its then current state.
1 A test familiar in VAT – see Note X Group Y Schedule Z Value Added Tax Act 1994 and the
considerable case law on that subject.
55. We have tested this decision based only on our construction of paragraph 18(1)(a)
by considering what other material is available to us to indicate the purpose of the
legislation or the policy rationale for the distinctions paragraph 18(1)(a) makes, and
whether there is any case law or para-statutory material available to us. We have also
considered the guidance HMRC have referred us to as well as other HMRC guidance
while bearing in mind that such guidance is not the law.
56. Having looked at this material we have not sought to give HMRC or the appellant
any opportunity to comment on it, because it is ancillary to our decision.
57. As to the policy, the oddity about Schedule 4ZA is that if one removes paragraphs
4 and 7, the policy is clear. The charge to the higher rates on individuals applies only
if the dwelling acquired is not the first dwelling belonging to that individual.
58. The Government issued a consultation document (“condoc”) in December 2015
on the proposed additional rates.
59. The Foreword, by David Gauke MP, then Financial Secretary to the Treasury,
“Owning a home is an aspiration for millions of people in our country.
This government is committed to helping people achieve that aspiration,
by supporting those who want to work hard, save and buy their own
home. Home ownership is also a key part of the government’s plan to
provide economic security for working people at every stage of their life.
In the last Parliament, we took significant steps to support housing
supply and low-cost home ownership, and at the Spending Review and
Autumn Statement 2015 we went further by announcing a bold Five
Point Plan for housing. This Plan re-focuses support for housing
towards low-cost home ownership for first-time buyers.
Alongside delivering 400,000 affordable housing starts by 2020-21,
extending the Right to Buy to housing association tenants, accelerating
housing supply and introducing London Help to Buy, the Five Point Plan
includes the introduction of higher rates of Stamp Duty Land Tax
(SDLT) on purchases of additional residential properties.
The higher rates will be 3 percentage points above the current SDLT
rates, and will take effect from 1 April 2016. The government will use
some of the additional tax collected to provide £60 million for
communities in England where the impact of second homes is
The tax receipts will help towards doubling the affordable housing
budget. This will help first time buyers and is part of the government’s
commitment to supporting home ownership.
This consultation represents a real opportunity to inform and develop a
key part of the government’s Five Point Plan for housing, and I look
forward to the contributions of all interested parties.”
60. At 1.1 (Background) it said:
“The higher rates of SDLT are part of the government’s commitment to
supporting home ownership. The higher rates will apply to most
purchases of additional residential properties in England, Wales and
Northern Ireland where, at the end of the day of the transaction,
individual purchasers own two or more residential properties and are not
replacing their main residence.
The government will use some of the additional tax collected to provide
£60 million for communities in England where the impact of second
homes is particularly acute. The tax receipts will also help towards
doubling the affordable housing budget.”
61. At 1.3 (Policy context) it said:
Higher rates of SDLT on additional residential properties form part of
the government’s Five Point Plan for housing. The government believes
it is right that people should be free to purchase a second home or invest
in a buy-to-let property.
However, the government is aware that this can impact on other people’s
ability to get on to the property ladder. Applying higher rates of SDLT
to additional residential property purchases is part of the government’s
commitment to supporting home ownership and first time buyers.
62. The policy was therefore to discriminate against second home and buy to let
purchases in favour of purchases of a sole residence by making the tax payable on the
former higher than on the latter.
63. That this was the policy driver behind Schedule 4ZA can be seen from the
Explanatory Notes to Clause 117 of the Finance Bill, that clause becoming s 128 in the
Finance Act 2016.
“76. The higher rates of SDLT for additional dwellings and dwellings
purchased by companies was introduced by the Government’s [sic] to
support home ownership.”
64. This refers of course to Schedule 4ZA as a whole including paragraphs 4 and 7.
Those paragraphs they do not require the purchase to meet Conditions C and D in
paragraphs 3 and or the condition in paragraph 6(1)(e) respectively. Condition D in
paragraph 3 and paragraph 6(1)(e) require the purchase in question to be of a dwelling
or dwellings additional to one already owned by the same person (or attributed to that
person). Accordingly the higher rates apply to a first purchase of a dwelling by a
company. How then does this fit with the policy?
65. The foreword to the condoc drafted for David Gauke MP has this:
“The higher rates will also generally apply to purchases of residential
property by companies.”
66. But no more. It is however more than is said under “Policy context” in paragraph
1.3, which is nothing.
67. The first reference to what became paragraph 4 Schedule 4ZA is in the main part
of the condoc headed, strangely, “Policy Design”. It is:
“2.20 The first purchase of a residential property by a company or
collective investment vehicle
As made clear in this consultation, where an individual purchases their
first residential property the higher rates will not apply. If the
government mirrored this treatment for purchases made by companies
and collective investment vehicles this would create a potential tax
In particular, an individual could purchase an additional property via a
company to avoid the higher rates of SDLT.
To guard against this avoidance risk the government proposes that the
first purchase of a residential property by a company or collective
investment vehicle is subject to the higher rates of SDLT (subject to the
final decision on the treatment of significant investors as discussed in
68. As this section suggests, corporate vehicles had been mentioned in the previous
section which was about a possible relief for additional purchases by certain types of
collective investment vehicles including those in corporate form (the relief was never
69. In March 2016 the Government published its response to the condoc. There is no
mention in the Foreword of corporate purchases. In section 1.46 it says:
“The higher rates of SDLT form part of the government’s overall
housing strategy including support for home ownership. The higher
rates of SDLT are therefore intended to apply to the vast majority of
circumstances where individuals or companies and other non-natural
persons purchase additional properties, which can impact on other
people’s ability to get on the housing ladder.” [emphasis added]
70. Despite this, paragraph 4 was enacted in the simple terms it was – with no let out
for a first residential dwelling company acquisition. Thus what paragraph 4 is is a
blanket untargeted anti-avoidance provision with no let outs, eg by a motive test or
through “guidance” as with the notorious example of the CGT loss TAAR2
. In our
view, in the circumstances of this case where there can be no avoidance, we should be
slow to find that a corporate purchase is liable to the higher rates of SDLT, especially
by a developer as in this case who was to and did create a habitable and suitable
dwelling on the site after demolition of the bungalow,.
71. It is ironic that had the consideration for this purchase been over £500,000 so as
to attract the 15% rate given by Schedule 4A FA 2003 it is quite likely that the relief
given in paragraph 5 of that Schedule, which disapplies the 15% rate where the interest
in the land is acquired for development and resale in the course of a property
development trade, would have applied. Of course we are not seeking to apply this
relief as if it were in Schedule 4ZA because Parliament has decided not to give similar
relief in that Schedule. What we are doing by referring to this relief in Schedule 4A is
to point up the extreme bluntness of the corporate provisions of Schedule 4ZA as an
72. We also note that s 138 FA 2013 gives an equivalent developers’ relief in the
rules for the tax on enveloped dwellings known as ATED.
73. We turn now to other tax law which uses the phrase “suitable for use as a single
dwelling” (“the exact phrase”) or closely similar expressions (“similar phrase”) to see
if any light is cast on the ambit of it in such provisions.
74. A similar phrase appeared in s 116 FA 2003, in Part 4, the part of that act which
introduced SDLT. It omits the word “single”. Section 116 is a section defining the
term “residential property”, but says no more than is said by paragraph 18(1)(a)
75. A similar phrase (without “single”) also appears in para 7 Schedule 6A FA 2003
(relief for certain acquisitions of residential property), inserted by Schedule 39 FA 2004
and in paragraph 7 Schedule 4A FA 2003 (higher rate for certain transactions) inserted
by Schedule 35 FA 2012 but without any more said relevantly for the purposes of this
76. The exact phrase appears in paragraph 7 Schedule 6B FA 2003 (transfers
involving multiple dwellings) inserted by FA 2011, but again without any more said
relevantly for the purposes of this case.
77. A similar phrase (without “single”) does appear outside SDLT legislation in
similar circumstances. Schedule 29A FA 2004 (inserted by FA 2006) provides for
certain tax consequences for pension schemes investing in property. Taxable property
includes “residential property” and by paragraph 7 such property includes a building
used or suitable for use as a dwelling, but again without any more said relevantly for
the purposes of this case.
78. In FA 2013 Parliament introduced the ATED (annual tax on enveloped dwellings)
legislation imposing an annual charge on dwellings held in a corporate vehicle. Section
112 defines “dwelling” and in subsection (1) uses the exact phrase. However (and to
our minds relevantly) subsection (6) expands on subsection (1) saying:
“(6) If a building or part of a building becomes temporarily unsuitable
for use as a dwelling for any reason (including accidental damage,
repairs or any other physical change to the building or its environment),
that temporary unsuitability is ignored in determining whether or not the
building or part of a building is, during the period in question, a dwelling
for the purposes of this Part.”
79. Section 131 also expands on s 112(1):
“131 Damage to a dwelling
3 The same applies to paragraph 9 Schedule 6ZA (relief for first time buyers) but this was inserted into
FA 2003 by FA 2018 so postdates our case and so cannot be used as a guide to the interpretation of
(1) This section applies where a dwelling is damaged so as to be
temporarily unsuitable for use as a dwelling.
(2) The unsuitability for use as a dwelling is taken into account in
applying the definition of “dwelling” for the purposes of this Part (see
section 112) only if the first and second conditions are met.
(3) The first condition is that the damage is—
(a) accidental, or
(b) otherwise caused by events beyond the control of the person
entitled to the single-dwelling interest.
(4) The second condition is that, as a result of the damage, the building
concerned is unsuitable for use as a dwelling for at least 90 consecutive
(5) Where the first and second conditions are met—
(a) the entire period of unsuitability for use as a dwelling (including
the first 90 days) is taken into account in applying the definition of
(b) work done in that period to restore the building to suitability for
use as a dwelling does not count, for the purposes of section 112 or
113, as construction or adaptation of the building for use as a
(6) The first condition is regarded as not being met if the damage occurs
in the course of work that—
(a) is done for the purpose of altering the dwelling (or a building of
which it forms part), and
(b) itself involves, or could be expected to involve, making the
building unsuitable for use as a dwelling for 30 days or more.
(7) In this section—
(a) references to alteration include partial demolition;
(b) references to a building include a part of a building.”
80. FA 2015 introduced a charge to CGT on residential property sold by
non-residents. Schedule B1 TCGA, inserted by that Act, defines “UK residential
property interest” (“UKRPI”) (the subject matter of a taxable disposal). By paragraph
1(2) the first condition for a disposal of a UKRPI is that that land has at any time
consisted of or included a “dwelling”, which term is defined in paragraph 4. Paragraph
4(1) sets out a definition including the exact phrase, and paragraph 4(1) adds:
“(10) A building which (for any reason) becomes temporarily unsuitable
for use as a dwelling is treated for the purposes of sub-paragraph (1) as
continuing to be suitable for use as a dwelling; but see also the special
(a) paragraph 6 (damage to a dwelling), and
(b) paragraph 8(7) (periods before or during certain works).”
81. Paragraph 6 reproduces s 131 FA 2013 about damage to a dwelling. Paragraph
“(1) This paragraph applies where a person disposes of an interest in UK
land, and a building which is (or was formerly) on the land and has at
any time in the relevant ownership period been suitable for use as a
(a) has undergone complete or partial demolition or any other works
during the relevant ownership period, and
(b) as a result of the works, has, at or at any time before the
completion of the disposal, either ceased to exist or become
unsuitable for use as a dwelling.
(2) If the conditions in sub-paragraph (4) are met at, or at any time
before, the completion of the disposal, the building is taken to have been
unsuitable for use as a dwelling throughout the part of the relevant
ownership period when the works were in progress.
(3) If the conditions in sub-paragraph (4) are met at, or at any time
before, the completion of the disposal, the building is also taken to have
been unsuitable for use as a dwelling throughout any period which—
(a) ends immediately before the commencement of the works, and
(b) is a period throughout which the building was, for reasons
connected with the works, not used as a dwelling.
(4) The conditions are that—
(a) as a result of the works the building has (at any time before the
completion of the disposal) either ceased to exist or become suitable
for use otherwise than as a dwelling,
(b) any planning permission or development consent required for the
works, or for any change of use with which they are associated, has
been granted, and
(c) the works have been carried out in accordance with any such
permission or consent.”
82. What these ATED and CGT provisions show is that Parliament assumed that
accidental damage, damage which is not accidental but was caused by events beyond
the control of the owner, partial demolition, repairs or any other physical change to the
building or its environment could make a building unsuitable for use as a dwelling. The
fact that the unsuitability might be temporary is not relevant for our purposes, looking
as we are at an instant of time, whereas ATED and CGT are looking a tracts of time.
83. Clearly Parliament is not saying that every event of the types described will make
a building unsuitable to be used as a dwelling, and there is a value judgement to be
made as to whether the damage etc did actually make the building unsuitable. We think
however that these provisions point very much in the same direction as our decision
based on the wording of the legislation.
84. We next look to see if there is any relevant case law. HMRC did not mention
any. There are cases in this Tribunal on Schedule 4A FA 2003 and on Schedule 29A
FA 2004 but none of them cover the issue here. But in Carson Contractors Ltd v HMRC UKFTT 530 (TC) Judge Charles Hellier and Mr Charles Baker FCA CTA
discuss the meaning of dwelling in the context of Group 6 Schedule 8 Value Added
Tax Act 1994 (zero rating of alterations to protected buildings). In the case the question
was whether two buildings within a single curtilage, the main building and a converted
barn, constituted a single dwelling. The Tribunal said:
“44. In Daniel Nabarro4
the question was whether construction work
fell within Group 6 Sch 7A. The relevant test was whether or not the
conversion of premises “consisting of a building” resulted, after the
conversion, in a different number of dwellings in the building than
before. The works concerned the demolition of a flat attached by a
garage wall and a covered way to a house, and the addition of two
storeys to the house. The tribunal had to decide whether before the
conversion there were two dwellings in one building or one dwelling
comprised of two buildings. It found that there were two dwelling in
one building before the conversion and one dwelling in one building
afterwards. In assessing how many dwellings there were the tribunal
had regard to what was said in Uratemp5
45. In Uratemp, the Lord Chancellor said ‘“Dwelling” is not a term of
art, but a familiar word in the English language, which in my judgement
in this context connotes a place where one lives, regarding and treating
it as home.’ In our judgement a dwelling will, as a minimum, contain
facilities for personal hygiene, the consumption of food and drink, the
storage of personal belongings, and a place for an individual to rest and
to sleep.” [our emphasis]
85. The bungalow at the date of completion did not contain what the Tribunal in
Carson considered were the minimum facilities for a building to be a home and
therefore a dwelling. This decision while not binding on us is helpful confirmation of
86. In ACC Loan Management Ltd v Browne and another  IEHC 722 (Mrs
Justice Baker) the High Court in Ireland considered whether a loan which the plaintiff
lender had called in was a “housing loan”. The lender argued that it was a housing loan
(something which took it outside consumer protection legislation) because it met the
requirements in s 2(1) Consumer Credit Act 19956 as being:
“(d) an agreement for the provision of credit to a person on the security
of a mortgage of a freehold or leasehold estate or interest in land on
which a house is, or is to be, constructed where the person to whom the
credit is provided is a consumer;”
87. Section 2 also defines a “house” as:
“any building or part of a building used or suitable for use as a dwelling
and any outoffice, yard, garden or other land appurtenant thereto or
usually enjoyed therewith”.
88. The building in question was described at :
4 Daniel Nabarro and The Commissioners for Her Majesty’s Revenue and Customs,  UKFTT
5 Uratemp Ventures Limited v Collins  UKHL 43.
6 No 24 of 1995 (Acts of the Oireachtas).
“The evidence is that there was a ruin on the Donegal lands. The
defendants say that since at least 1999 the house was fully derelict, and
had no roof, the walls had collapsed, and what remained was an outline
of approximately three blocks in height where they once stood. The
Bank offered no contrary evidence and the credit memorandum, one of
the Bank’s internal documents, described the house as ‘remains of an
old stone house’, and also refers to it in another place as a ‘ruin’.”
89. Baker J goes on:
“64. Counsel for the Bank argues that the condition of a building does
not, of itself, determine whether a building is a house. He argues that a
“house” within the meaning of the Act of 1995 does not need to be
habitable. However, this argument ignores that fact that the statutory
definition requires the building to be “suitable” for use as a dwelling. It
may in fact be more correct to identify a house as building which is not,
or not likely to be, an office, a factory, or another commercial building.
65. Because there was no evidence before me of an intention on the part
of the defendants to improve the ruin with a view to making it suitable
for habitation, I will leave for decision in a suitable case the question of
whether the definition includes a house which may be made suitable for
use as a dwelling, because it seems to me that counsel for the defendants
is correct that at the least a house has to be a building. She argues that
the ruin in its present form is not even a building.
66. A building, in its widest sense, can include any form of structure
including the example given by counsel for the defendants: the Spire on
O’Connell Street or a coffee kiosk or pod on a public street. While in
certain circumstances one could consider that a caravan or mobile home
is a building used as a dwelling, I consider for the purposes of the
legislation that a house must have at least some structures which would
provide shelter including, at least, some walls, windows or window opes[sic], and a roof, even if that roof was not watertight. Thus, I consider
that a house, for the purposes of the Act of 1995, given that the definition
includes an element of suitability for use as a dwelling, must be a
building which offers some degree of enclosure or shelter. There was
nothing on the Donegal land that could have even conceivably offered
shelter in which any person might have dwelled, even uncomfortably
and without modern conveniences. A degree of shelter, protection from
the elements, is in my view a necessary element.”
90. This is far more extreme example of dereliction than the bungalow7
. The judge
found that walls and a roof, protection from the elements was a necessity, but she did
not find that it was sufficient to make a building a dwelling. The decision (also not
binding) does not persuade us that we were wrong to find that the bungalow, even
though it did had basic protection from the elements was not suitable for use.
91. Finally we look at the guidance, both that relied on by HMRC and that found by
7 Reading Irish decisions can give the impression at times that the arguments put forward owe more to
the imagination and writings of Flann O’Brien/Myles na gCopaleen (Brian O’Nolan) than a study of the
92. HMRC produced a definition of “dwelling” from an unidentified internet source.
It seems to be from Google dictionary. It is:
“a house, flat, or other place of residence.”
And a quotation is given:
“the proposed dwelling is out of keeping with those nearby”
93. This did not help us to find the meaning of what we needed to find. Dictionary
definitions, however eminent the dictionary, rarely assist, especially when what we
have to find the meaning of is the phrase “a building suitable to be used as a …
dwelling” and in particular of “suitable” in that context.
94. They also produced from the GOV.UK website a “Definition of general housing
terms” prepared in 2012 by the Ministry of Housing, Communities and Local
Government and intended for “local authorities compiling data.” All we learned from
this is that a bungalow would be classified as a dwelling for the purposes intended. The
document does not discuss what facilities are need to make a building a dwelling, but
assumes their existence.
95. HMRC also showed us paragraph 00365 of their Stamp Duty Land Tax Manual
“Scope: what is chargeable: land transactions: residential and
non-residential property: further notes
In most cases, there will be no difficulty in establishing whether or not
a property is residential property.
Use at the effective date of the transaction overrides any past or intended
future uses for this purpose. If a building is not in use at the effective
date but its last use was as a dwelling, it will be taken to be ‘suitable for
use as a dwelling’ and treated as residential property, unless evidence is
produced to the contrary.
Undeveloped land is essentially non-residential but may be residential
property if, at the effective date, a residential building is being built on
Where, at the effective date, an existing building is being adapted or
marketed for, or restored to, domestic use, it is treated as residential
A building that is used only partly as a dwelling may nevertheless be
suitable for use wholly as a dwelling. Its overall suitability will be
judged from the facilities available at the effective date. For example, if
two rooms of a house were in use as a dentist’s surgery and waiting room
at the effective date, HMRC would nevertheless normally consider this
property suitable for use as a dwelling.
Cases involving bed and breakfast establishments or guest houses will
be treated on their merits. However, a bed and breakfast (B&B)
establishment which has bathing facilities, telephone lines etc installed
in each room and is available all year round would be considered
96. Only the second sentence in the second paragraph here is relevant. “[i]t will be
taken” is clearly a taking by HMRC and is a reasonable stance to adopt in an enquiry.
The problem for HMRC here is that the appellant has produced evidence to the contrary,
not just at the hearing but also before it. And we have accepted that evidence.
97. We have looked at other material. The Explanatory Notes (see §63) are, on the
question of the definition in paragraph 18 Schedule 4ZA FA 2003 quite useless (and
lazy) as they simply say that the definition is the same as in Schedule 6B FA 2003. The
Explanatory Notes for paragraph 7 of that Schedule say, relevantly:
“Paragraph 7 of new Schedule 6B provides rules to establish what
constitutes a dwelling for the purposes of relief under Schedule 6B.”
98. However on 16 March 2016 HMRC published a “Guidance Note” on “Stamp
Duty Land Tax: higher rates for purchases of additional residential properties.” This
says at 2.7”
“2.7 “Dwelling” takes its everyday meaning; that is a building, or a part
of a building that affords those who use it the facilities required for
day-to-day private domestic existence. In most cases, there should be
little difficulty in deciding whether or not particular premises are a
99. In our view such facilities were not present in the bungalow on the completion
100. HMRC did not however shows us SDLTM09525 which is in the part of the
manual dealing with Schedule 4A (the 15% rate) and where the definition of residential
property uses the same phrase as in Schedule 4ZA but without the word “single”. The
Manual says on this phrase:
“Scope: when is Stamp Duty Land Tax (SDLT) chargeable: higher
rate charge for acquisitions of residential property by certain
non-natural persons FA03/S55/SCH4A: when is a property
‘suitable for use as a dwelling’?
Guidance on when a property is ‘suitable for use as a dwelling’ can be
found in Statement of Practice 1/2004. This guidance is supplemented
by SDLTM20076. Whether a property is suitable for use as dwelling is
a question of fact. SDLTM20076 states that:
‘Use at the effective date of the transaction overrides any past or
intended future uses for this purpose. If a building is not in use at the
effective date but its last use was as a dwelling, it will be taken to be
‘suitable for use as a dwelling’ and treated as residential property, unless
evidence is produced to the contrary.
101. This is what SDLTM00365 says but that paragraph does not refer to the Statement
of Practice 1/2004. That Statement refers to the now repealed disadvantaged areas
relief which used the same definition of residential property. SP1/2004 says:
“SUITABLE FOR USE AS A DWELLING
15 The suitability test applies to the state of the building at the effective
date of the transaction, having regard to the facilities available and any
history of use. For example, HMRC will not regard an office block as
“suitable for use as a dwelling”, but a house which has been used as an
office without particular adaptation may well be so.
16 If a building is not in use at the effective date of the transaction but
its last use was as a dwelling, it will be taken to be “suitable for use as a
dwelling” and treated as residential property for the purposes of the
relief, unless evidence is produced to the contrary (see paragraph 17).
17 Whether a building is suitable for use as a dwelling will depend upon
the precise facts and circumstances. The simple removal of, for
example, a bathroom suite or kitchen facilities will not be regarded as
rendering a building unsuitable for use as a dwelling. Where it is
claimed that a previously residential property is no longer suitable for
use as a dwelling, perhaps because it is derelict or has been substantially
altered, the claimant will need to provide evidence that this is the case.
See also paragraph 34.
18 Where a building has been used partly for residential purposes and
partly for another purpose, its overall suitability for use as a dwelling
will be judged from the facilities available at the effective date of the
transaction. For example, if two rooms of a house were in use as a
dentist’s surgery and waiting room at the effective date of the
transaction, HMRC would nevertheless normally consider this property
suitable for use as a dwelling unless the claimant provided evidence to
the contrary. A building that is used only partly as a dwelling may
nevertheless be suitable for use wholly as a dwelling, with the effect that
the £150,000 limit applies to the whole of the consideration. Where only
a distinct part of the building is used and suitable for use as a dwelling,
that part will be residential property for the purposes of the relief and the
mixed use provisions will apply (See paragraphs 19 and 20 below). “
102. Paragraph 17 is more explicit than the Manual in that it accepts that dereliction
or alteration could make a dwelling unsuitable, even if the “simple” removal of kitchen
facilities or a bathroom suite, would in what was the Inland Revenue’s view, not make
103. We can see nothing in HMRC’s guidance in whatever form that alters our view
as to the unsuitability of the bungalow.
What rate of stamp duty is due?
104. The SDLT1 return was made on the basis that Code 01 applied – this is for
“residential (not including additional residential properties)”. HMRC said that Code
04 for “Residential additional properties” should have been used, pointing out that even
though the property is not an additional property, the rubric for Code 04 says it must be
used for a purchase by a company purchasing any residential property even if it is the
only such property owned”. Oddly Lyons said to Mr Lord that their client told them
the building was not capable of being a dwelling, yet they still used Code 01.
105. The charge to tax and the rates in s 55 FA 2003 apply, in a case where Schedule
4ZA does not, differently to residential property and to non-residential property.
Residential property is defined in s 116(1) FA 2003 and means a building used or
suitable for use as a dwelling and land that forms part of the garden etc of that dwelling,
and “non-residential property” is, logically, any property that is not residential property.
The purchase of the land and building by the appellant, given our decision that the
building was not suitable to be used as a dwelling and the fact that it was not so used at
the time of purchase, means that it was non-residential (and the Code should have been
106. For non-residential property the rates of tax are 0% on the first £150,000 of the
consideration and 2% on the balance, ie 2% of £50,000 or £1000, not £1,500 as
self-assessed. We have considered whether it is in our power to reduce the assessment
to below the amount self-assessed. It is clear from d’Arcy v HMRC8
that where the
Tribunal is exercising the power it has in s 50 Taxes Management Act 1970 (“TMA”)
it is doing it to the self-assessment as amended by HMRC following a closure notice.
But it does not seem limited to reducing or cancelling the additional amount, even
though the appellant would be out of time to amend it. We can see no reason not to
apply this reasoning to the equivalent provision to s 50 TMA in paragraph 42 Schedule
10 FA 2003.
107. And so our decision under paragraph 42(2)(a) Schedule 10 FA 2003 is that the
appellant is overcharged by a self-assessment (both as originally made and as amended
by HMRC) and we reduce the self-assessment to £1,000.
108. 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 First-tier Tribunal (Tax Chamber)” which accompanies
and forms part of this decision notice.
RELEASE DATE: 28 JANUARY 2019
8 SpC 549 (Special Commissioner John Avery Jones).