Did you know – Uninhabitable properties are not liable for 3% stamp duty surcharge?

Since April 2016 an additional 3% stamp duty charge has been imposed on buyers purchasing a second home. Irrespective of the circumstances.

However, following a recent landmark case, buyers purchasing a derelict property could now be exempt from paying this second-home tax. Nicola Roby briefly explains.

The details

A tax tribunal heard earlier this month found in favour of Paul and Nikki Bewley, who had purchased a derelict bungalow in Weston-Super-Mare for £200,000. The property was purchased as a buy-to-let investment however the bungalow was riddled with asbestos and in such poor condition that the couple demolished it to build a new home in its place.

The Bewleys paid the normal rate of £1,500 in stamp duty on the purchase in January 2017 believing that as the property was uninhabitable they were not liable for the 3% second-home tax.

HMRC argued that a buyer should be liable for the higher rate of stamp duty if a property was capable of being used as a dwelling in the future and therefore the Bewleys should have paid the additional 3% surcharge of £6,000.

The tribunal disagreed with HMRC and found in favour of the Bewleys who represented themselves. It said that the 3% surcharge should only be levied if the home was suitable for immediate habitation.

This case sets a precedent that suggests that an exemption exists for buy-to-let investors looking to avoid the 3% stamp duty surcharge, as the ruling indicates that by buying a property that is derelict or uninhabitable, the surcharge doesn’t apply.

Future Implications

This case could open the door for hundreds of retrospective claims from buy-to-let investors who have paid the additional charge for the purchase of properties which required significant renovation.

HMRC has not yet decided whether to appeal, with a spokesperson saying “We are considering the judgment carefully.”

As the ruling could open the floodgates for home buyers reclaiming millions of pounds in paid stamp duty on the purchase of uninhabitable properties, it’s likely that HMRC are considering the judgement very carefully indeed.


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.

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