UT/2023/000063 - [2024] UKUT 00307 (TCC)

To recap, we have concluded as follows:

We turn now to the words used.

First, Mr Firth submits that “use” means “occupation”. We do not agree. The two terms are not synonymous, and the drafter has chosen in section 116 not to refer to occupation. In various other contexts, Parliament has used the phrase “use or occupation”, and that alternative has not been selected. In the SDLT legislation, there are many examples of references to “occupation” (or in some cases occupation or enjoyment) alongside references to use, clearly indicating that Parliament intended use and occupation to have distinct meanings. This matters, in our opinion, because a requirement of suitability for occupation as a dwelling would carry a stronger implication that the building was ready or available as at the relevant date for occupation by a buyer.

Second, the drafter has used suitability as the relevant threshold, and not, for instance, availability or readiness. This is particularly important because, as we have said, in context we consider that suitability for use as a dwelling is a test which focusses on the fundamental characteristics and use of a building that is acquired, which may be informed by its previous use.

Mr Firth’s formulation of suitability for use as a dwelling has the effect of importing two restrictions. The first is temporal and the second is qualitative. The temporal restriction is that the building must be ready for immediate use as a dwelling as at the effective date, subject to some unspecified de minimis period of time for repairs to be carried out. The qualitative restriction is that any necessary repairs must be “minor”.

We firmly reject the suggested temporal restriction. It effectively construes “suitable for use” as meaning “ready for immediate occupation/use”. As we have explained, that is not warranted by the words used, or the construction which we set out above. It is an approach which has not been accepted in any of the FTT authorities we have discussed, and it would be inconsistent with Fiander UT, which implicitly approves the express rejection of that test in Fiander FTT.Mr Firth sought to distinguish Fiander UT on the basis that the case was concerned with multiple dwellings relief, but we do not see any logical reason to confine the statements about the meaning of suitability for use to that relief.

The fact that a temporally-based approach to the wording is inappropriate is highlighted by the fact that Mr Firth was driven to soften his proposed construction with a de minimis test. He argued that in construing any statutory wording, a de minimis exclusion should apply unless it is expressly or clearly indicated it should not. Therefore, he said, his construction of “suitable for use as a dwelling” as requiring immediate habitability would not be failed if a building needed only minor repairs which would only take “a few days” to carry out after the effective date. Mr Firth said that the rationale for an interpretation based primarily on the time any works would take was that use meant occupation, and a building needed to be ready for occupation at the effective date.

We have no hesitation in rejecting this submission. First, as we have explained, use is not interchangeable with occupation in construing section 116. Second, there is no support in any of the decided cases, including Fiander UT, for an interpretation which assesses suitability primarily by reference to the length of time repairs or renovations are likely to take. Third, there is no general assumption that definitions set out in tax legislation are to be construed as incorporating a de minimis exception absent a contrary indication. Fourth, the test is vague and uncertain; Mr Firth asserted that a delay to carry out repairs of “a few days” would be de minimis, a delay of “several months” would not, and there was no need for any firm line to be drawn. There is no reason to suppose that such uncertainty was intended by Parliament in applying section 116. Fifth, it would, in our view, be absurd that the SDLT liability attaching to a chargeable transaction could depend on an assessment of the anticipated availability of materials and labour in a particular location or region at a particular date.

The more difficult question is the quantitative issue. What are the circumstances in which the works required to a building at completion (which does not otherwise fall within section 116 because it falls within one of the three other categories we set out above) are such that it is not residential property because it is not suitable for use as a dwelling?

It is necessary to keep in mind that the determination of suitability for use as a dwelling is a multi-factorial assessment, and the need for repairs, if any, is only one factor in that assessment.

In our opinion, the following points should be considered in determining the impact of works needed to a building on its suitability for use as a dwelling:

We have considered whether it would be appropriate to set out more specific guidance, or to formulate the test by reference to some measure such as fundamentality. We have concluded that this would not be appropriate, and would run the risk of placing an unnecessary gloss on the statutory wording.