Upper Tribunal Tax and Chancery Chamber

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

Fecha: 28-Jun-2024

Context

Context

42.

The definition of “residential property” in section 116 results in four categories of residential property:

(1)

A building which is used as a dwelling.

(2)

A building which is suitable for use as a dwelling.

(3)

A building which is in the process of being constructed for use as a dwelling.

(4)

A building which is in the process of being adapted for use as a dwelling.

43.

Omitting for this purpose the references to Schedule 4ZA, the FTT commented on what can be inferred from this approach to the definition as follows, at FTT[52]:

…Put the other way round, the only buildings which do not count as dwellings are those which do not exist or exist but are not used and not “suitable” for use as dwellings, [and] where the construction/adaptation works required to construct or adapt them to be suitable as dwellings have not begun…If part-constructed/adapted buildings…can count as a dwelling, it would seem surprising for a property which had recently been used as a dwelling and was fundamentally capable of being so used again (there being no lack of structural or other physical integrity preventing this) not to count as a dwelling because there are obstacles to immediate occupation, even though those obstacles do not go to the physical integrity of the building and are capable of being fixed without too much difficulty.

44.

We agree with this observation. Looked at in context, it would be surprising if Parliament had intended that a building which does not yet exist, or exists but is not a dwelling, would be residential property if within categories (3) or (4), but a building which had already been residential property because it had in fact been used as a dwelling, and had fallen within category (1), could cease to be residential property simply because it required repair or renovation at the effective date in order to be habitable.

45.

In our opinion, this suggests that the phrase “suitable for use as a dwelling” is more likely to be focussed on the fundamental characteristics (Footnote: ³) and nature of a building which is the subject matter of the transaction than on a snapshot classification by reference to habitability at the effective date. In determining the fundamental characteristics and nature of a building, whether it has in fact been used as a dwelling is clearly relevant.

46.

We do not consider that this conclusion is undermined by the fact that the legislation charges SDLT by reference to the “effective date” of a chargeable transaction. The primary function of the concept of an “effective date” (in section 119) is to fix the date on which SDLT must be paid. SDLT is a tax on transactions, and the relevant transaction requires an analysis of the chargeable interest acquired. That in turn requires consideration of the “main subject matter” of the chargeable interest acquired: section 43. These points were emphasised in the Upper Tribunal’s decision in Ladson Preston Ltd v HMRC [2022] UKUT 301 (TCC) (‘Ladson Preston’). Although Ladson Preston concerned multiple dwellings relief, the approach set out in that decision is applicable in contexts such as that in this appeal. In HMRC v Suterwalla [2024] UKUT 188 (TCC), the Upper Tribunal stated as follows, at [48]-[49]:

48.

In our view, the relevant points to be taken from [61] and [62] of LadsonPreston are as follows:

(1)

Debates about whether the definition of effective date in section 119 specifies the entirety of a day or a particular point in time have no bearing on the availability or otherwise of a particular SDLT relief or treatment, which turns on the nature of the subject matter of the chargeable transaction.

(2)

In such a case, the availability or otherwise of a relief or treatment depends on the nature of the chargeable interest acquired (see section 43(6)).

(3)

Where, as in this case, the chargeable interest is acquired at completion of the relevant land transaction, the chargeable interest acquired is the chargeable interest that exists at the time of completion.

(4)

Whether a particular SDLT relief or treatment applies requires an analysis of the nature of the chargeable interest acquired at completion.

49.

We consider that the approach described by the UT in Ladson Preston and encapsulated in the points above is not restricted to cases where the issue is whether the subject matter of a transaction consists of multiple dwellings. It is relevant whenever the particular SDLT treatment or relief turns on the nature of the subject matter of a chargeable transaction.

47.

So, the focus of the enquiry made necessary by the wording in section 116 is to determine whether the essential characteristics and nature of the chargeable interest that is acquired are those of a dwelling (rather than, say, a plot of land), notwithstanding that it needs repair and renovation.