Flat with defective cladding was a dwelling

The taxpayer acquired a flat for the purposes of its property rental business. After completion it discovered that the flat could not be let on a formal tenancy because the block was rendered with dangerous cladding. While remedial work was carried out the daughter of the directors of the taxpayer and her friend occupied the flat. They moved out when the work was finished and the taxpayer entered into a formal tenancy with other unconnected tenants.

In its stamp duty land tax return the taxpayer claimed relief from the 15% rate for high-value residential transactions on the basis that it had acquired the property for its property rental business (FA 2003 Sch 4A para 5(1)(a)). Initially HMRC disputed the relief was due. It later agreed it had been available when the flat was bought but that it should be withdrawn because a non-qualifying person – a...