empty property

Property Investors and developers could bypass second-home stamp duty if property is uninhabitable 

A landmark court case found that buyers purchasing uninhabitable properties shouldn’t have to pay the extra stamp duty surcharge on second homes. 

Since 2016, there has been an extra 3% stamp duty tax on properties bought as an additional property to the buyer’s home. Now homebuyers, buy-to-let investors, and developers buying an additional property might be able to cut out the surcharge if the home is derelict. 

A landmark ruling 

In a recent article, The Times analysed the impact of a tax tribunal in Bristol ruling in favour of homeowners Paul and Nikki Bewley. For £200,000, the couple bought a derelict bungalow located in Weston-super-Mare as buy-to-let investment and second propertyThe bungalow was infested with asbestos and didn’t have central heatingso they completely demolished it and built a new home. 

Even though HM Revenue & Customs argued buyers should have to pay the higher rate of stamp duty if the property could be used as a dwelling in the future, the tribunal said the charge should only apply if the home is immediately habitable.  

Exciting news for investors and developers 

This ruling could allow previous buyers who paid the extra charge for an uninhabitable property to claim millions of pounds back. Additionally, the outcome of this case could encourage more property investors and developers to buy derelict properties and renovate them 

Recently, there has been a lot of tax changes for landlords and buy-to-let investors, which have made it more difficult for them to generate revenue, so this recent ruling is likely welcome news. It brings forward a way investors could get around the extra surcharge on second homes. 

Since the additional 3% tax was introduced in April 2016, the government has taken nearly £4.9bn through the second-home tax and has refunded £618m. Some 45% of HMRC’s stamp duty income is from second homes. Just last year this came in at over £3.8bn with the extra 3% surcharge generating £1.68bn.

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