Q. Is it true that if I buy a second property which is uninhabitable then I’m not liable for the three per cent stamp duty surcharge?

A. Since April, 2016, an additional three per cent stamp duty charge has been imposed on buyers purchasing a second home.

However, following a recent landmark case, buyers purchasing a derelict property could now be exempt from paying this surcharge. A tax tribunal found in favour of Paul and Nikki Bewley, who had purchased a derelict bungalow for £200,000.

The property was purchased as a buy-to-let investment but was riddled with asbestos and in poor condition so the couple demolished it to build a new home in its place. They paid the normal rate of £1,500 stamp duty believing that, as it was uninhabitable, they were not liable for the three per cent 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. Therefore, the Bewleys should have paid the three per cent surcharge of £6,000.

The tribunal disagreed with HMRC saying the surcharge should only be levied if the home was suitable for immediate habitation.

This case suggests an exemption exists for buy-to-let investors looking to avoid the three per cent stamp duty surcharge, as the ruling indicates that by buying a property that’s uninhabitable, the surcharge doesn’t apply.

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

HMRC hasn’t yet decided whether to appeal, saying “We’re considering the judgment carefully.”