We’ve recently seen an increase in the number of enquiries about when residential properties are exempt from Stamp Duty Land Tax due to them not being suitable for use as a dwelling.
On 19 March 2016 HMRC issued guidance on this subject in their Stamp Duty Land Tax Manual, which was most recently updated on 11th January 2024.
The guidance suggests that a property that “has been damaged to the extent that normal repair work, replacement or modernisation cannot resolve the issues” might not be considered as habitable.
HMRC draw a distinction between derelict properties and those “in need of modernisation, renovation or repair”. The nub of the issue according to the guidance is whether there is a lack of structural or other physical integrity in the property that would make it dangerous to live in or work on.
The guidance provides non-exhaustive examples of works that will not render a dwelling as uninhabitable:-
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Removal of bathroom or kitchen facilities for the purpose of replacing them.
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Substantial repairs required to windows, floors, or roof.
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Replacement of central heating boiler and associated pipework.
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Unsafe electrical wiring.
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Utilities having been turned off.
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Infestation of pests.
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Damp proofing being required or damage to plastering.
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Flood damage.
HMRC deems these to be “common issues which can be rectified relatively quickly”. The guidance provides examples of works that would exclude a residential property from being suitable for use as a dwelling:-
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The existence of high levels of asbestos that cannot be removed without de-constructing a property before repair works can be undertaken.
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The presence of high radioactive pollution.
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High probability of walls collapsing.
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Where there are hazards present that could result in a Local Authority issuing a Prohibition Notice restricting the use of the property.
The queries we receive relating to claims that properties are uninhabitable usually fall within the examples of common improvements and/or maintenance works required for residential properties. Based on the HMRC guidance, a property in which, for example, the bathroom or kitchen has been removed in readiness for replacement, would not be considered uninhabitable.
The advice we can provide in relation to tax of any kind, including Stamp Duty Land Tax, is limited and if you believe a residential property you are purchasing may be eligible for Stamp Duty Land Tax relief due to it being uninhabitable, we recommend you seek advice from an accountant who specialises in Stamp Duty Land Tax.
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