Safe Habitation.

HMRC’s Guidance on Property Habitability for Stamp Duty Reclaims

HMRC’s 2024 guidelines state: “Examples of when a property will be considered not suitable for use as a dwelling include…where there are hazards present that would cause a local authority to issue a prohibition notice restricting use of the premises.” This means if there are significant safety issues with the property, it could be declared unfit for living. Read HMRC Guidance (Link opens new tab)

Remember, the guidance clarifies: “hazards present that would cause a local authority to issue a prohibition notice”. This doesn’t mean that there must be an actual prohibition notice already issued; it’s enough that the hazards could potentially lead to one being issued for the property you’re purchasing.

Local councils use a system called the Housing Health and Safety Rating System (HHSRS) (Link open a new tab)  to check for hazards in homes. If they find very serious (category 1) or less serious (category 2) hazards, they can issue a notice under the Housing Act 2004 that stops anyone from using all or part of the house.

If you bought a house that has these kinds of hazards, according to HMRC rules, your house is considered not suitable to live in. This means it shouldn’t be treated as a residential property when calculating Stamp Duty. Therefore, if you’re a property investor who has paid a higher rate of Stamp Duty, you might be able to reclaim overpaid Stamp duty.

To clarify: A property can be considered uninhabitable for Stamp duty purposes without needing a prohibition notice from the local authority. You just need to provide evidence of either category 1 or category 2 hazards at the time of purchase.

Understanding the Housing Health and Safety Rating System (HHSRS)

  • Framework Application: The HHSRS provides a systematic approach to evaluate health and safety risks in residential properties, identifying hazards that impact habitability.
  • Hazard Categories:
    • Category 1 Hazards: Immediate, serious risks requiring urgent attention. Examples include major structural damage or significant fire hazards. Local authorities must act on these hazards by law.
    • Category 2 Hazards: Less severe but still significant risks that may also warrant attention, such as minor electrical issues or moderate dampness.

Procedure for Reclaiming Stamp Duty

  • Eligibility for Reclaim: To reclaim overpaid Stamp Duty, you must demonstrate the presence of Category 1 or Category 2 hazards at the time of purchase. This is in line with the Finance Act 2003 and HMRC guidance effective from March 19, 2016.
  • Evidence Requirement: Provide solid evidence, such as hazard assessments and visual documentation, proving the property was uninhabitable at the time of purchase.
  • Potential for Reclaim: If your property exhibits Category 1 or 2 hazards that make it non-habitable, HMRC typically honours these legitimate reclaims.

Documenting Condition Issues

  • Assessment and Evidence: If you have photographs or video footage of the condition issues at time of purchase and they show HHSRS category 1 or category 2 issues, we can assemble a case.
  • Documents required: SDLT5, TR1, contract of sale, completion statement.

HHSRS Inspection Checklist: Identifying and Understanding Hazards

For an in-depth guide on how HHSRS inspections are conducted, please refer to this informative PDF (Link opens new tab).

  • Damp and Mould Growth
    • Health Effects: Allergies, asthma, and other issues from dust mites, mould, or fungal toxins.
    • Associated Problems: Mental and social well-being can also be adversely affected in damp, humid, and mouldy conditions.
  • Excess Cold
    • Health Effects: Can cause or worsen respiratory conditions such as flu, pneumonia, and bronchitis; increases risk of cardiovascular issues like heart attacks and strokes.
    • Optimal Temperature Range: 18°C to 21°C.
  • Excess Heat
    • Health Effects: Can lead to dehydration, heatstroke, and cardiovascular and respiratory problems.
  • Asbestos and Manufactured Mineral Fibres (MMF)
    • Health Effects: Asbestos exposure can damage lungs; MMF exposure can harm skin, eyes, and lungs.
  • Biocides
    • Health Effects: Risks from chemicals used on timber and mould include inhalation dangers, skin contact, and ingestion.
  • Carbon Monoxide and Fuel Combustion Products
    • Health Effects: Excess levels can cause dizziness, nausea, headaches, disorientation, unconsciousness, and breathing problems.
  • Lead
    • Health Effects: Lead ingestion can lead to nervous disorders, mental health issues, blood production problems, and other serious health impacts.
  • Radiation
    • Health Effects: Radon gas exposure can increase the risk of lung cancer.
  • Uncombusted Fuel Gas
    • Health Effects: Escaping fuel gas can lead to suffocation.
  • Volatile Organic Compounds
    • Health Effects: Exposure can cause allergies, irritation to eyes, nose, and skin, and impact mental health like headaches and dizziness.
  • Crowding and Space
    • Health Effects: Lack of adequate space can cause psychological distress, mental disorders, increased risk of hygiene issues, and accidents.
  • Entry by Intruders
    • Health Effects: Insecure properties can increase stress, fear of burglary, and potential injuries from intrusions.
  • Inadequate Lighting
    • Health Effects: Poor lighting can cause depression from lack of natural light, eye strain, and other visual discomforts.
  • Noise
    • Health Effects: Noise exposure can affect mental health and physical well-being, leading to sleep disturbances, poor concentration, headaches, and anxiety.
  • Domestic Hygiene, Pests, and Refuse
    • Health Effects: Poor sanitation can attract pests and lead to infections, asthma, allergies, and other diseases.
  • Food Safety
    • Health Effects: Inadequate facilities for food storage, preparation, and cooking can cause foodborne illnesses such as stomach and intestinal diseases.
  • Personal Hygiene, Sanitation, and Drainage
    • Health Effects: Inadequate personal and clothes washing facilities can increase the risk of infections and mental health issues.
  • Water Supply
    • Health Effects: Contaminated water can cause dehydration, headaches, and serious illnesses like Legionnaires’ disease.
  • Falls Associated with Baths
    • Health Effects: Falls in bath or shower areas can lead to cuts, lacerations, swellings, and bruising.
  • Falls on Level Surfaces
    • Health Effects: Trips and falls on flat surfaces can cause bruising, fractures, and serious head, brain, and spinal injuries.
  • Falls Associated with Stairs and Steps
    • Health Effects: Falls on stairs or ramps can cause similar injuries, particularly where there are changes in level greater than 300mm.
  • Falls Between Levels
    • Health Effects: Falls from significant heights, including balconies or windows, can lead to severe injuries.
  • Electrical Hazards
    • Health Effects: Can cause electric shocks and burns.
  • Fire
    • Health Effects: Exposure to uncontrolled fire and smoke can cause burns, smoke inhalation issues, and fatalities.
  • Flames, Hot Surfaces, and Materials
    • Health Effects: Contact with hot surfaces or flames can cause burns, scalds, and potentially deadly injuries.
  • Collision and Entrapment
    • Health Effects: Getting trapped or colliding with building features can cause physical injuries like cuts and bruising.
  • Explosions
    • Health Effects: Explosive events can cause physical injuries, crushing, and severe trauma.
  • Ergonomics
    • Health Effects: Poor ergonomic design can lead to strain and sprain injuries.
  • Structural Collapse and Falling Elements
    • Health Effects: Risks from structural failures or falling debris due to disrepair or severe weather can cause severe physical injuries.

To effectively assess whether a property qualifies for a stamp duty reclaim,  examine our case studies. These examples illustrate the variety of condition issues we’ve successfully navigated in past reclaims. Or see the gallery below.