Bought a property in the last 4 years that was derelict, unsafe, or had structural problems?
Did it require reconstruction work or demolishing?
If so, you may have overpaid stamp duty.

Was your property genuinely derelict when you bought it? If the building had deteriorated to the point that it had lost the essential features of a home — for example, collapsing or unsafe floors, a missing or severely compromised roof, unstable structural walls, or dangerous contamination such as asbestos — it may not have qualified as a “dwelling” for stamp duty purposes. This is very different from cases involving normal renovation or modernisation (such as rewiring, plumbing, or cosmetic work), which the courts have made clear remain residential in law.

Following the Court of Appeal’s judgment in Mudan v HMRC [2025], a property that was “not suitable for use as a dwelling” at the moment of completion may instead fall under the lower non-residential rates — even if the exterior appearance suggested an ordinary house.

If you paid higher rates of SDLT or purchased a property valued above £1 million (or £600,000 for post-October 2024 transactions), you may be entitled to a stamp duty refund. The same legal principles also apply to LBTT in Scotland and LTT in Wales.

We are very selective about the cases we submit to HMRC. HMRC is actively challenging unsuitable or poorly evidenced claims, and is scrutinising both taxpayers and agents for incorrect or speculative filings (see article).

Click to see images of derelict properties.

The Mudan Case and What Counts as a Suitable Claim

The Court of Appeal’s decision in Amarjeet & Tajinder Mudan v HMRC is now the leading authority on when a property is “suitable for use as a dwelling” for SDLT, LBTT and LTT purposes.

The Court confirmed that the legal test is strict. A property remains a dwelling unless it has lost its fundamental characteristics as a residential building. The following points summarise the position:

• Suitability does not mean “ready to move into”.
• It can be unsafe, require extensive repairs, or have non-working services and still be classed as a dwelling.
• Ordinary renovation issues—damp, mould, old wiring, unusable kitchens or bathrooms—do not meet the threshold.
• A property is only “not suitable for use as a dwelling” if its core residential function has been compromised or lost.

Examples of cases that may qualify:

• Severe or dangerous structural instability
• Partial collapse or absence of a roof
• Buildings too unsafe to repair without specialist intervention
• Properties that have effectively become shells
• Situations where occupation is legally prohibited

These situations are rare. Most properties marketed as “uninhabitable” or “in need of complete renovation” will still remain dwellings in law, even if no reasonable person would live there in their current state.

What Happens After Making an NSFU Claim

Once a claim is submitted, HMRC may send an NSFU-1 letter and form. This is part of a nationwide compliance campaign focusing on unsuitable-for-use claims.

It is important to understand the following:

• The NSFU-1 form is not legally required. You do not have to complete or return it.
• It is not a formal enquiry. HMRC are required to open a Schedule 10 enquiry if they want to legally challenge the claim.
• In my experience, completing the NSFU-1 form is usually unnecessary and creates .

Why? Because signing the form confirms that you personally stand behind the legal interpretation of your claim. If HMRC later disagree, they may use that signed declaration as evidence when attempting to impose a penalty for careless behaviour under Schedule 24 FA 2007.

This is particularly relevant because NSFU claims are inherently contentious and highly arguable. HMRC dispute most such claims unless the evidence of structural failure or loss of dwelling identity is exceptionally strong.

For this reason, I generally advise clients not to sign the NSFU-1 form unless we have fully reviewed the case and are confident that the claim clearly meets the Mudan threshold.

More detail on the form can be found here:
Understanding the NSFU-1 Form ↗

Our Fee Structure for NSFU Cases

We operate on a contingency basis for genuine unsuitable-for-use claims:

Base fee: 15% of the refund
VAT: Not charged
No win, no fee

However, because these cases are challenging, evidence-heavy and often contested by HMRC, we must assess the strength of the case before agreeing to act. If we identify that HMRC could reasonably contest the position, we may need to:

• adjust the fee structure to reflect the additional work and risk, or
• decline to accept the case if the evidential basis is too weak.

We provide clear, candid advice from the outset so you can make an informed decision before proceeding.

Call 0204 577 3323 or email [email protected] for an assessment.