May 23

Could you get a stamp duty refund on your buy-to-let property?

The tax tribunal ruling that could save buy-to-let investors thousands

A recent tax tribunal ruling could spell good news for buy-to-let landlords, and bad news for HMRC. If you have paid out the extra 3% stamp duty imposed by the government on investment properties, you may be able to claim a refund. In this article, you’ll learn whether the ruling could affect you.

The stamp duty that buy-to-let investors pay

When you purchase an investment property, you are required to pay a 3% stamp duty surcharge on top of the stamp duty you would pay were you buying the property as your main residence. For a property valued at £250,000, this surcharge equals an extra £3,750 in costs. Not an inconsiderable sum.

Paul and Nikki’s story

Investors Paul and Nikki Bewley bought a derelict bungalow in Western-super-Mare. At the time they bought it, the property was uninhabitable (hey, you might like to read our article about the new Homes (Fitness for Human Habitation) Act 2018).
The couple’s plan was relatively straightforward: demolish the property and build a new home in its place. They believed that since they were demolishing the original property, they would not need to pay the 3% stamp duty surcharge.
HMRC waved their red flag, stamped their feet, and insisted that the stamp duty surcharge must be paid. Their view was that the property could be used as a dwelling in the future.

Enter the tax tribunal

The couple decided to take HMRC to a tax tribunal, and let the law decide who was right. It turns out the law is on the side of the Bewleys. The tax tribunal found that the stamp duty surcharge is only chargeable if the property is habitable at the time of purchase.

What does this mean for buy-to-let landlords?

This ruling could be a gilt-edged opportunity for buy-to-let landlords. If you have invested in a property that was uninhabitable – perhaps the sort of ‘fixer-upper’ you see sold at auctions on property investment programmes like ‘Homes Under the Hammer’ – you may be able to claim a refund of the 3% extra stamp duty you paid out.
If you are considering an investment in such a property, you may not need to pay the stamp duty surcharge.

Will the ruling of the tax tribunal be challenged?

At this time, it appears that HMRC has not yet decided whether to appeal against the ruling. If they don’t, it could be the signal for buy-to-let landlords who have previously invested in uninhabitable properties and paid the surcharge to make a claim for a refund. That could lead to thousands of buy-to-let investors claiming back their 3%.

Proving a property is uninhabitable

Of course, if the tax tribunal ruling is held up or not contested, to make a claim against the stamp duty surcharge you paid on the purchase, you will need to prove that the property you have already bought and renovated was uninhabitable at the time of purchase. Some key documentation that could help you do this includes:

  • Surveyors’ reports
  • Details of work undertaken, including estimates and invoices
  • The selling agent’s report or advertisement (e.g. an auction house brochure that describes the property as uninhabitable)

You may also compare the state of the property to the details included in the Homes (Fitness for Habitation) Act 2018.
Our advice for those buying such properties now is to keep all documentation associated with your purchase and to take specific legal and tax advice with regards to the stamp duty surcharge.

Ezytrac – making property management effortless

Our legal team keeps on top of the ceaseless changes to property and landlord laws, rules and regulations. We also watch what is happening that affects landlords. It’s great to bring good news. To find out more, and how this tax tribunal ruling may affect you, contact one of our team today at +44 0 1522 503 717.
Live with passion,
Brett Alegre-Wood


buy-to-let landlord, stamp duty

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