SDLTM00400 | Scope: what is chargeable: land transactions: Residential Property– Dwellings (Constructed or Adapted)

(This page was introduced on 01 October 2019)

Category 2 - In the process of being constructed or adapted for use as a dwelling

The guidance applicable to category 1 (“used as or suitable for use as a dwelling”) will also apply to category 2 in relation to the anticipated use of a dwelling that is in the process of being constructed or adapted. This is the only category where intended or anticipated use is relevant, because without anticipating what the finished building will be used for it is not possible to test whether it will ultimately be “suitable for use as a dwelling.”

The process of construction or adaptation must be physically underway for this category to apply. HMRC do not consider obtaining planning permission on its own to be part of this process, if work on the property in line with the planning permission has not yet commenced at the time of the land transaction (see SDLTM00360). However, if construction or adaptation has begun at the time of the land transaction, then the planning permission would be a strong indicator of what the building is to be used for i.e. whether it should be treated as a residential or non-residential property.

Relevant properties that are in the process of being constructed will be treated as dwellings at the point where building works on top of the foundations have begun. This will be more than a hole in the ground. Furthermore, preparatory works, including demolition of previous buildings, site preparation etc., are not considered sufficient to determine that construction of a dwelling has started. These may be considered ‘construction works’ but they do not involve the construction of the building for use as a dwelling, as the legislation specifies.