Legal Case Overview: Bewley v HMRC (2019)
In the 2019 case of Bewley v HMRC, the First-tier Tax Tribunal determined that a bungalow and the accompanying plot of land were not suitable for use as a residential dwelling at the time of purchase. As a result, the higher 3% Stamp Duty Land Tax (SDLT) surcharge — typically applied to additional residential properties — did not apply, saving the developer a significant amount on initial costs.
Initially, the buyer had classified the property as residential on the SDLT return, prompting HMRC to review the case and demand an additional £6,000 in tax. Bewley disputed this assessment, arguing that the property’s condition rendered it uninhabitable and therefore exempt from residential rates.
The appeal was taken to the First-tier Tribunal (FTT), setting a crucial precedent for how uninhabitable properties are evaluated under SDLT law.
Bewley contended that the property did not qualify as a dwelling because it:
Had remained unoccupied since 2014 and was marketed without any interior photographs.
Had a demolition survey (2016) confirming the removal of the heating system and the presence of asbestos requiring removal.
Had a mortgage survey (2016) describing it as a derelict bungalow in poor internal condition and unsuitable for mortgage purposes.
HMRC opined that the property:
Was considered a residential dwelling, as it was either suitable for use as a single residence or could become so through construction or adaptation.
Did not need to be free from disrepair to qualify as a dwelling; the buyer’s unwillingness to renovate did not make it non-residential.
Did not have to be mortgageable in order to be treated as a residential property.
Was located in a residential area and always intended for residential use.
Had been declared as residential in the SDLT return.
Had planning permission (PP) supporting continued residential use.
Contained asbestos, but this was not deemed sufficient to prevent renovation or future occupation.
PN Bewley VS HMRC
If you purchased a property in the last four years that had any of the following issues that prevented someone from living there immediately, we may be able to open a case for you!
The First-tier Tribunal (FTT) concluded the following:
The effective date of the transaction is the key date therefore, the impact of the refurbishment/demolition works on the residential status were irrelevant; and
The “use test” is clear as either a property is used as a dwelling or it is not thus, it should not be considered whether the property it suitable for, capable of or designed to be used for residential use.
The FTT agreed with HMRC that the dilapidations of a dwelling does not necessarily prevent it from being a dwelling; asbestos does not prevent reoccupation but this was not part of the use test for if the property was a dwelling at the effective date of transaction, HMRC’s points were strongly criticised by the FTT for being incorrect and on some points entirely irrelevant. The decision makes it clear that for the purposes of the higher 3% rates of SDLT the test is whether the building is used as or is suitable for use as a dwelling. When a building was originally built as a dwelling, if it is not suitable for use as a dwelling at the effective date of the transaction the residential rates (including the higher 3% rates of SDLT) cannot apply.
Ongoing Criteria
Since the Bewley v HMRC ruling, HMRC has provided only limited and unclear guidance on what qualifies as non-residential property for Stamp Duty Land Tax (SDLT) purposes — and has generally remained silent about the wider implications of this case law.
However, based on court findings and expert legal interpretation, the following conditions could potentially classify a property as non-residential under SDLT:
Significant safety hazards that prevent safe occupation, such as unsafe electrics, asbestos, fire risks, structural instability, unsafe gas or water supply, rot, damp, or pest infestation.
Absence of essential facilities required for habitation, such as a functioning kitchen, bathroom, heating, running water, or electricity.
It’s important to distinguish between a property that simply needs cosmetic updates or minor repairs and one that is truly unfit for occupation.
If you’ve purchased a property within the last four years that might meet these conditions, it may be worthwhile to speak with one of our The Stamp Duty Experts to assess your eligibility for a stamp duty refund.
