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Quote Ref: WS1

Stamp Duty surcharge loophole for BTL investors

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A recent tax tribunal has exposed a possible loophole in the law regarding the surcharged usually paid by buy to let property investors, suggested Landlord Today in an article on the 26th of March.

The case at issue involved a demand from HM Customs & Revenue (HMRC) for the 3% surcharge payable on the purchase of a second home – and, therefore, typically paid by buy to let investors. 

The purchasers challenged HMRC’s demand on the grounds that the property they bought was derelict – and they subsequently demolished it in order to build a new home.

HMRC had argued that the Stamp Duty surcharge was still due, since the property could be fit for use as a dwelling at a future date.

On appeal by the purchasers, however, the tax tribunal ruled that the Stamp Duty surcharge is only payable if the property had been fit for habitation at the time it was bought. 

The ruling therefore potentially opens the way for countless other buyers of derelict or abandoned property who have been charged the 3% surcharge on Stamp Duty if it is a second home which they intended to renovate and let to tenants to appeal against the decision and look for a refund from HMRC. 

In our report of the 10th of April 2018, we revealed that practically a half of all Stamp Duty received by HMRC is accounted for by buy to let investors paying the 3% surcharge which was introduced in 2016.