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New case law helps to define meaning of residential property

What is a dwelling? This might seem like a question with an obvious answer, but whether a property is residential or non-residential could make a considerable difference to the amount of Stamp Duty Land Tax (SDLT) that a property attracts, as highlighted in the recent case of PN Bewley Ltd v HMRC.

On a non-residential property purchase, SDLT is charged in bands of 0%, 2% & 5%, whilst residential rate bands range from 0% to 12%. For additional properties, or those purchased by companies, the rates are 3% to 15%. Therefore, if a property is non-residential it has the potential to save significant amounts of SDLT.

Current legislation defines residential property, for SDLT purposes, as anything suitable for use as a dwelling; for non-residential it is any property, which is not entirely residential. Historically, there has been little guidance on how HMRC has interpreted “used or suitable for use as a single dwelling”, which is why the judgment in Bewley is particularly helpful in providing some clarity.


The company purchased a bungalow with a view to demolishing it and redeveloping the site. At the time of the purchase the heating system and some floorboards had been removed and the presence of asbestos meant that refurbishment was not viable. The property had been marketed as having planning permission for demolition and redevelopment, and a surveyor’s report stated that the property was derelict.

The directors of the company, Mr & Mrs Bewley, argued that the bungalow was not suitable for use as a dwelling and the First-tier Tribunal agreed. As the building was therefore not a dwelling, the SDLT must be based on the lower, non-residential rates.

Implications for buyers

In light of the Bewley case, buyers should carefully consider whether their property is wholly residential or not. If it is the latter, it may qualify for the non-residential rates of tax, which could offer a substantial tax saving.

What is clear from this case is that HMRC is looking closely at SDLT and is willing to take matters to Tribunal or Court where they disagree with the tax position – even for SDLT amounts at the lower end of the scale.

There are also some wider implications of Bewley. For example, for the purposes of Multiple Dwellings Relief, what constitutes a dwelling?

The Tribunal also looked at guidance regarding mixed use (ie, not wholly residential) property, which may be relevant in the context of determining the SDLT rate to be used for properties bought with large gardens or substantial grounds.

For further help and advice around the topics discussed in this article, or any other SDLT related issues, please get in touch with Fiona Phillips, tax consultant, by calling (01904) 275250 or emailing

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