Can you appeal an SDLT closure notice and ask HMRC to postpone the disputed tax?

Introduction

Readers often search for this issue after HMRC rejects a Stamp Duty Land Tax (SDLT) repayment claim or closes an enquiry and says more tax is due. A common question is what happens next: can the taxpayer appeal, can the case be put on hold pending another court decision, and does the disputed tax have to be paid immediately?

This article explains the position where HMRC has issued a closure notice under Schedule 11A to the Finance Act 2003 and the taxpayer argues that the property was not suitable for use as a dwelling at the effective date of the transaction. It also explains the practical effect of the recent case law, including the higher threshold now applied in uninhabitable property cases following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A taxpayer made an SDLT overpayment claim on the basis that a purchased property should have been treated as non-residential because, at the effective date of the transaction, it was allegedly not suitable for use as a dwelling. HMRC later issued a closure notice rejecting that claim.

The taxpayer’s adviser had not initially received the closure notice because correspondence had been sent to an earlier address. Once the notice was received, the taxpayer wanted to know:

• whether an appeal could still be made in time;
• whether the appeal could rely on the developing case law about “suitable for use as a dwelling”;
• whether the appeal could be stayed behind the Mudan litigation; and
• whether HMRC could postpone collection of the disputed SDLT while the appeal was ongoing.

Nick’s Explanation

Nick’s position was that the taxpayer should formally appeal the closure notice and make clear that the core issue was whether the property was “suitable for use as a dwelling” under section 116(1)(a) FA 2003.

In anonymised form, his explanation was that the taxpayer maintained the property was not suitable for use as a dwelling at the effective date because of its condition and multiple hazards, and therefore should have been taxed at non-residential SDLT rates.

He also pointed out that the legal meaning of “suitable for use as a dwelling” was central to the then-pending appeal in Mudan v HMRC, and that while HMRC could not itself pause an enquiry after issuing a closure notice, the taxpayer could seek a stay from the First-tier Tribunal under the Tribunal’s case management powers.

Nick further requested postponement of the disputed tax under paragraph 16 of Schedule 11A FA 2003 pending determination of the appeal. HMRC then confirmed two important procedural points:

• the appeal had been recorded; and
• collection of the disputed tax would be postponed pending determination of the appeal.

The Law

The relevant SDLT rules are found in the Finance Act 2003.

Section 116 FA 2003 contains the meaning of residential property. Broadly, property is residential if it consists of or includes a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use.

Where a taxpayer says a building was not suitable for use as a dwelling at the effective date of the transaction, the dispute is usually about section 116(1)(a).

Claims to amend the tax treatment after filing, and HMRC enquiries into those claims, are dealt with under Schedule 11A FA 2003. In particular:

• paragraph 11 allows HMRC to issue a closure notice;
• the taxpayer may appeal against HMRC’s conclusion in the closure notice; and
• paragraph 16 provides a mechanism for postponement of the tax in dispute pending the appeal.

The practical route is therefore:

1. HMRC opens an enquiry into the claim;
2. HMRC issues a closure notice rejecting the claim or amending the position;
3. the taxpayer appeals; and
4. the taxpayer may seek postponement of the disputed amount while the appeal is unresolved.

On the substantive law, the courts have repeatedly considered what “suitable for use as a dwelling” means. The modern approach is not satisfied simply because a property is unattractive, in poor repair, or requires renovation. The test is objective and can be demanding.

That is especially important after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. In uninhabitable or “not suitable for use” cases, the threshold is now relatively high. Serious disrepair does not automatically make a property non-residential for SDLT purposes. The issue is whether, viewed objectively at the effective date, the building had crossed the line so that it was no longer suitable for use as a dwelling.

Analysis

Step one is to identify what HMRC has actually done. If HMRC has issued a closure notice under Schedule 11A, the enquiry stage is over. That means HMRC will not normally “pause” the enquiry because there is no longer an open enquiry to pause.

Step two is to appeal the closure notice within the permitted time limit. If there has been a correspondence problem, that may be relevant to whether a late appeal should be accepted, but the safest course is to appeal as soon as the notice comes to light.

Step three is to frame the substantive ground of appeal properly. In this type of case, the issue is whether the property was residential at the effective date. If the taxpayer says it was not suitable for use as a dwelling, the evidence must focus on the condition of the building at that exact point in time.

Step four is to assess the strength of the “unsuitable for use” argument in light of current case law. This is where many claims now face difficulty. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the courts have made clear that the threshold is relatively high. A property may still count as residential even if it has defects, hazards, missing items, outdated facilities, or requires substantial works. The fact that a buyer would not want to move in immediately does not by itself decide the SDLT classification.

Step five is procedural strategy. If another appellate case is likely to affect the legal test, the taxpayer may ask the First-tier Tribunal to stay the appeal behind that authority. That is different from asking HMRC to keep the enquiry open. Once a closure notice has been issued, the tribunal process becomes the relevant forum for case management.

Step six is cash-flow protection. A taxpayer who appeals can ask HMRC to postpone collection of the disputed SDLT under paragraph 16 of Schedule 11A FA 2003. If HMRC agrees, the disputed amount is not collected while the appeal is being determined, although interest may still continue to accrue depending on the circumstances.

Applied to this scenario, the procedural position is straightforward:

• the closure notice was appealable;
• the appeal was in fact lodged;
• HMRC accepted that the appeal had been recorded; and
• HMRC confirmed postponement of collection of the disputed tax pending the appeal.

The harder issue is the substantive SDLT argument. A taxpayer can still argue that the property was not suitable for use as a dwelling, but the merits must now be tested against the stricter approach confirmed by the Court of Appeal in Mudan. In practical terms, many properties that are run-down, unsafe in some respects, or in need of major refurbishment may still be treated as residential for SDLT.

Outcome

The practical conclusion is this: if HMRC issues an SDLT closure notice rejecting an overpayment claim, the taxpayer can appeal and can ask for the disputed tax to be postponed pending the appeal.

However, where the appeal is based on the argument that the property was not suitable for use as a dwelling, the taxpayer should proceed with caution. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition threshold in uninhabitable cases is relatively high. Many properties in poor condition will still be classed as residential property for SDLT purposes.

Practical Steps

If you are in this position, the sensible next steps are:

1. Check the date of the closure notice and the appeal deadline immediately.
2. If there has been any issue with service or correspondence going to the wrong address, keep clear evidence of that.
3. Submit a written appeal identifying the statutory basis of the appeal and the precise ground relied on.
4. If the dispute concerns suitability for use as a dwelling, gather contemporaneous evidence from the effective date, such as survey reports, photographs, contractor reports, lender correspondence, and any environmental or safety evidence.
5. Assess the evidence against the current post-Mudan legal threshold, not against older and more optimistic assumptions about “uninhabitable” properties.
6. Request postponement of the disputed tax under paragraph 16 of Schedule 11A FA 2003 if payment is being sought while the appeal is ongoing.
7. Consider whether to ask the First-tier Tribunal for a stay if there is another pending authority that may materially affect the appeal.

Conclusion

Yes, a taxpayer can appeal an SDLT closure notice and ask HMRC to postpone collection of the disputed tax while the appeal is decided. But if the argument is that the property was not suitable for use as a dwelling, the legal test is now demanding. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, only more serious cases are likely to succeed.

Legal References Used

• Finance Act 2003, section 116(1)(a)
• Finance Act 2003, Schedule 11A
• Finance Act 2003, Schedule 11A, paragraph 11
• Finance Act 2003, Schedule 11A, paragraph 16
• Mudan v HMRC [2024] UKUT 307 (TCC)
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

See all questions and answers categorized in this sitemap. Or use Google site search below.