Can a long-empty property stop being a dwelling for LBTT because it was vacant and in poor condition?

Introduction

This is a common question in Scottish land tax disputes. A buyer may purchase a property that has been empty for many years, is in obvious disrepair, and needs major renovation. It can then seem unfair if Revenue Scotland still treats it as a dwelling for Land and Buildings Transaction Tax (LBTT) purposes.

But the legal test is narrower than many people expect. The issue is usually not how long the property was vacant, whether it looked neglected, or whether a home report fully captured its condition. The real question is whether, at the effective date of the transaction, the building had ceased to be a dwelling in law.

That is now a relatively difficult argument to run. In particular, the threshold for saying a property was not suitable for use as a dwelling is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A taxpayer challenged Revenue Scotland’s decision that a purchased property was a dwelling for LBTT purposes. The main points raised were that the property had been unoccupied for a long period and that the condition at the time of sale had not been properly reflected in the material available during the transaction.

Revenue Scotland upheld its original decision on review. The taxpayer was then considering whether to take the matter on to the tribunal.

Nick’s Explanation

Nick’s central point was that the original challenge focused on facts that may sound persuasive but do not answer the legal test.

In anonymised form, his explanation was:

“The key issue is not whether the property was lived in recently, but whether at the effective date of the transaction the building had lost its identity as a dwelling due to physical disrepair, risk of collapse, or similar serious defects.”

He also explained that arguments based mainly on long vacancy or an imperfect home report are usually weak:

“A property can be unoccupied for decades and still legally count as a dwelling if it remains structurally sound.”

That is the important practical point. A tribunal is unlikely to be persuaded simply because the property was empty for many years, needed refurbishment, or was unattractive. The case must be presented by reference to the correct statutory and case-law test, with evidence showing that the building had genuinely ceased to function as a dwelling by the effective date.

The Law

LBTT is charged under the Land and Buildings Transaction Tax (Scotland) Act 2013. Whether a transaction is residential or non-residential depends in part on whether the subject-matter includes a “dwelling”.

Scottish legislation must always be read on its own terms, but courts and tribunals may look at persuasive case law from other UK jurisdictions where similar wording and concepts are involved. In disputes about whether a building is suitable for use as a dwelling, the courts have repeatedly focused on the physical condition of the property at the effective date of the transaction.

The leading modern authority referred to in the explanation is Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Although that was decided in the SDLT context, it is highly relevant to the meaning of a dwelling and to the “suitable for use” analysis. The Court of Appeal made clear that the test is demanding. The question is not whether the property was pleasant to live in, mortgageable, recently occupied, or in need of repair. The question is whether it remained physically suitable for use as a dwelling.

The effect of Mudan is that the threshold for saying a property was uninhabitable or not suitable for use as a dwelling is now relatively high. Serious disrepair may still not be enough if the building retains its essential character as a house or flat and is structurally capable of residential use.

Analysis

When applying the law, it helps to work through the issue in stages.

First, identify the relevant date. The condition of the property must be assessed at the effective date of the transaction. Later renovation works, later deterioration, or later expert opinions are only useful if they prove what the true condition was on that date.

Second, separate background facts from legal facts. A long period of vacancy may explain why the property deteriorated, but vacancy itself does not stop a building being a dwelling. The same is true of dated interiors, missing fittings, damp, or the need for substantial refurbishment. Those matters may support the case, but they are not decisive.

Third, ask whether the property had actually lost its identity as a dwelling. This is the core question. Relevant evidence may include structural instability, major collapse risk, absence of basic elements needed for occupation, severe water ingress causing fundamental damage, or a condition so serious that the building could not realistically function as a home in its existing state.

Fourth, consider what evidence would be needed. A taxpayer arguing that a property was not a dwelling should usually have contemporaneous evidence such as surveyor reports, photographs, contractor evidence, valuation material, and any documents showing the state of the structure and essential facilities at the effective date. General statements that the property was derelict or had been empty for years are unlikely to carry much weight on their own.

Fifth, test the strength of the original argument. If the challenge mainly says:

• the property had been empty for many years;
• the home report did not fully describe the condition;
• no one properly inspected the property before classifying it;

that is unlikely to be enough. Those points do not directly establish that the building had ceased to be a dwelling in law.

Sixth, apply the higher threshold confirmed by Mudan. After that decision, the courts are looking for something more serious than ordinary disrepair, neglect, or extensive renovation needs. The property must be shown to have crossed the line from “poor dwelling” to “not a dwelling”. That is a much harder case to prove.

Outcome

The practical conclusion is that a property does not stop being a dwelling for LBTT purposes simply because it was vacant for a long time or required major renovation.

If the building was still structurally capable of residential use at the effective date, Revenue Scotland is likely to treat it as a dwelling. A challenge is more likely to succeed only where there is strong evidence of very serious physical defects showing that the building had lost its identity as a dwelling altogether.

Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold for arguing that a property was uninhabitable or not suitable for use as a dwelling is now relatively high.

Practical Steps

If you are assessing a similar case, the most useful next steps are:

• identify the effective date of the transaction;
• gather photographs, survey reports, builder reports and valuation evidence from as close to that date as possible;
• focus on structural condition and actual suitability for residential use, not just vacancy or cosmetic disrepair;
• check whether the evidence shows serious defects such as collapse risk, major structural failure, or the loss of essential residential function;
• review the reasoning in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 and compare the facts carefully;
• if appealing, frame the case around the correct legal test rather than general unfairness or poor marketing material.

Where a review decision has already been upheld, any tribunal appeal should be tightly structured and evidence-led. The tribunal will want to know exactly why the property was not a dwelling in law at the relevant date, not simply why it was in bad condition.

Conclusion

A long-empty, run-down property can still be a dwelling for LBTT purposes. The real issue is whether, at the effective date, it had ceased to be physically suitable for use as a dwelling. That is now a high threshold, especially after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. In most cases, vacancy and renovation needs alone will not be enough.

Legal References Used

• Land and Buildings Transaction Tax (Scotland) Act 2013
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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