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SDLT refund on uninhabitable dwelling

Wha is the process for claiming a refund?

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My ltd client purchased an uninhabitable property a couple of years ago and paid the SDLT surcharge. They can reclaim that as the property was uninhabitable, does anyone know the process? I'm going round in circles on Gov.uk and can't find an answer - every form I get to seems to be specifically for other SDLT reliefs. 

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By kaff
06th Feb 2021 12:54

I believe you'll have to send in an amended return. There isn’t a relief for the property being “uninhabitable”. It’s a question of whether it’s a residential property in the first place. If it’s not suitable for living in then it’s not treated as a residential property and the residential rates don’t apply. So if the original return stated it was a residential property then you'll have to amend the return correcting that error.

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Replying to kaff:
Psycho
By Wilson Philips
06th Feb 2021 13:10

I agree - the property was either a dwelling or it was not at the time of purchase. OP - why was the habitable/uninhabitable status not considered at the time?

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By fawltybasil2575
06th Feb 2021 15:41

@ atleast . . .(OP).

(1) GOV.UK guidance is here:-

https://www.gov.uk/guidance/sdlt-hmrc-compliance-checks

[Note the paragraph “If you think your SDLT return is wrong”: the guidance relates to compliance checks, but the paragraph is clear advice].

(2) Useful guidance here, from CIOT, re amending Tax Returns generally – scroll down to para 4.7 for SDLT:-

https://www.tax.org.uk/sites/default/files/190205%20Amendments%20to%20Ta...

(3) An interesting case is here:-

https://www.casemine.com/judgement/uk/5e6881d62c94e041f197305f

(4) Here is the legislation – see paragraph (6):-

https://www.legislation.gov.uk/ukpga/2003/14/schedule/10

In short, just send a letter (from the client company) to HMRC, along the lines of:-

“The SDLT return submitted to you on xx/xx/xxxx, in respect of the above property, was submitted in error, as that property was not habitable. Formal amendment of the return (effectively a withdrawal of the return) is thus hereby made. Please refund the SDLT paid as soon as possible, and notify me, and my accountant, accordingly. If you have any queries, please address such queries to my accountant in the first instance".

Of course, HMRC will very probably request evidence to support the amendment, and hence you should, prior to submitting the letter to HMRC, satisfy yourself that the client company's claim is correct, including necessarily ascertaining WHY the SDLT return was submitted in the first place.

Basil.
EDIT. I now note from your question that the SDLT return was probably submitted outside the 12 months time limit required per 6(3) of the legislation: this may prove a considerable problem: if so, submitting to HMRC that the return was submitted "in error", and was thus invalid, may be the route to take if a request to HMRC for acceptance of a "late" amendment is rejected. Ascertaining the REASON for the erroneous return is essential, so as to be "ahead of the game".

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Replying to fawltybasil2575:
ALISK
By atleastisoundknowledgable...
06th Feb 2021 17:08

Thanks Basil - as thoroughly and useful as ever.

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ALISK
By atleastisoundknowledgable...
06th Feb 2021 17:06

I believe the SDLT was paid without thought ...
“ I’ve been made aware that you can claim SDLT back on uninhabitable properties.
I’m conscious when we purchased X the property was uninhabitable, only available to be bought by cash due to there being no working kitchen and the electrics not being fit for the one electric storage heater to work.”

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Replying to atleastisoundknowledgable...:
Psycho
By Wilson Philips
06th Feb 2021 17:30

I think you need to consider those words in conjunction with case law and HMRC guidance at SDLTM00385 before you and your client make yourselves look foolish.

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Replying to atleastisoundknowledgable...:
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By The Dullard
06th Feb 2021 17:36

Even if you're right and can get past the points in SDLTM00385, FA 2003, Sch 10, para 34A(4) says "TOUGH!", in my opinion.

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ALISK
By atleastisoundknowledgable...
06th Feb 2021 17:43

Thanks all

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By fawltybasil2575
08th Feb 2021 20:39

@ atleast . . (OP).

(1) SDLTM00385, to which Wilson Philips (17.30 0n 6 February 2021 post) refers, is here:-

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdlt...

(2) The legislation to which The Dullard refers is here:-

https://www.legislation.gov.uk/ukpga/2003/14/schedule/10

(3) Here is a link to an ICAEW report of a relatively recent SDLT case:-

https://www.icaew.com/technical/construction-and-real-estate-community/s...

(4) Here is a link to the FTT case referred to in (3) above:-

https://www.bailii.org/uk/cases/UKFTT/TC/2019/TC06951.pdf

Frankly, with respect I believe the above two eminent members [per (1) and (2)] are being too pessimistic.

Parts of the guidance in SDLTM00385 is, in the views of many (including Basil), are somewhat jaundiced. As the judgment indicated, and importantly as emphasised by commentators, it is not the future intentions for the property which hold the key, but the property’s condition at the TRANSACTION DATE.

As regards The Dullard’s comments, an important word in 34A(4)(b) is “reasonably”: such word is subjective, and the relatively recent statute, coupled with the relatively limited case law, render it certainly worth pursuing 34A(4) being inapplicable.

When one adds into the picture the point made in the “EDIT” to my last post, namely that the return should be considered a nullity, then there are several “strings to the bow” for seeking the SDLT refund.

As ever, one must draw an equation between (1) the potential SDLT overpayment at issue and (2) the costs of seeking that potential overpayment (it would be useful if you could indicate the amount at issue). You (and your client) are at “first base” in the matter, and the cost of submitting an appeal, and then requesting the acceptance of a late appeal if the appeal is initially rejected as being out of time, will I surmise be small in relation to the repayment.

If HMRC accept the appeal (or late appeal), perhaps in the (as you will contend) mistaken belief that the property should be classed as habitable, then (on the basis of the facts given by you) I believe you would have a good chance of success at FTT.

The “fallback” contention, if all else fails, is the “nullity” argument (albeit I surmise many would consider it unlikely to succeed; but worth pursuing nonetheless).

As ever, whilst you are bound by ethical standards not to submit “facts” which are incorrect, you are IMHO duty bound to pursue the possible repayment (or, if not happy to deal with it yourself, recommend his seeking representation elsewhere) if you are persuaded by my observations above.

You may note that the Judge in the FTT case, per (4) above, has a name remarkably similar to a highly esteemed AWEB regular contributor :).

Basil.

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Replying to fawltybasil2575:
Psycho
By Wilson Philips
08th Feb 2021 20:59

I don’t know why you think I was being pessimistic. Clearly no-one here is armed with sufficient information to conclude one way or the other as to whether the property was habitable or not. I was merely suggesting that the OP consider the facts alongside HMRC’s guidance before diving straight in with a claim. They would of course be well-advised to consider not only HMRC’s guidance but also the case law that you refer to.

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Replying to fawltybasil2575:
ALISK
By atleastisoundknowledgable...
08th Feb 2021 21:37

Basil, Sir, thank you.

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