An individual has won a First Tier Tribunal (FTT) appeal against a demand from HMRC over disputed stamp duty land tax (SDLT) payments.
The appellant claimed uninhabitable status and was able to save £168,000 in SDLT.
Clear evidence was provided to the FFT to highlight that the property in question was suffering from numerous serious defects, as well as hazards on the effective date of the transaction which made it too dangerous to live there.
Defects and hazards found at the property:
+ Severe damp issues throughout the property
+ Water damage which had destroyed internal partition walls
+ Missing banisters and stair rods which created safety risks
+ Faulty wiring that needed to be replaced throughout the property
+ Toxic mould in the bathrooms, entire ceiling joists were rotted due to water damage
+ Ceilings were being propped up using acro-props to maintain the structural integrity of the building
+ Asbestos was found in a total of eight locations at the property with the material score ranging between 2 to the maximum score level of 12 in once instance
+ Financing was also an issue; high street lenders and private banks were not willing to lend against the property
+ The valuation report provided to the specialist lender stated that the property was at “the stage where it is not suitable for habitation”, the report also stated that due to a number of health and safety issues, it was not suitable for letting purposes
The homeowner was represented by Cornerstone, the tax advisory firm headed up by David Hannah, who lost his own appeal against a first tier tribunal verdict in 2021 after he avoided paying thousands of pounds of tax on the acquisition of his property in Leicester.
Hannah was ordered by an Upper Tax Tribunal to repay the £30,600 stamp duty he avoided, plus a penalty of more than £17,000, after taking part in a tax-saving scheme when buying the 3,500 sq ft property in 2011.
The court was told that Hannah listed the 5% deposit he paid for the property, £38,250, as the full purchase price with the Land Registry and concealed the rest of its £765,000 value.
The remainder of the price was then paid to the sellers through an annuity registered in the British Virgin Islands, which the seller was then able to redeem once the purchase was completed.
This meant that the full purchase price was officially registered with the taxman as being just the deposit and Hannah had no stamp duty to pay, which HMRC deemed to be “a clear attempt at stamp duty avoidance”.
Delivering a written verdict at the tribunal, Mr Justice Morgan and Judge Swami Raghavan upheld the verdict of the first tier tribunal in 2019 that Hannah’s avoidance of stamp duty had been “deliberate”.
In 2020, Hannah was ordered to pay £60,000 in penalties, fines and court costs by the Taxation Disciplinary Board when it found he had played down the risks of a stamp duty avoidance scheme to a client – advice that he is believed to have offered a number of clients.
