Can you still claim lower SDLT because a property was uninhabitable?

Introduction

Many buyers ask whether they paid too much Stamp Duty Land Tax (SDLT) because the property they bought was in very poor condition. The issue usually arises where the dwelling needed major works, had serious defects, or could not be lived in safely at completion.

This area of SDLT has become much harder for taxpayers. The courts have tightened the meaning of a property that is “not suitable for use as a dwelling”, and the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

This article explains the current position in plain English and what a buyer should consider before assuming that a refund claim is possible.

The Question

A buyer completed the purchase of a residential property some time ago and now wants to know whether a reduction or refund of SDLT may be available because the property was allegedly uninhabitable when bought.

The buyer has conveyancing papers from the original purchase and is exploring whether the condition of the property at completion could mean that it was not a “dwelling” for SDLT purposes.

Nick’s Explanation

Nick’s explanation was that the law on uninhabitable properties has moved against taxpayers and that claims of this kind now face a much stricter test than before.

In anonymised form, his core point was:

“The rules around properties said to be uninhabitable have changed. Earlier cases were more favourable to taxpayers, but the threshold has been raised significantly. HMRC will now only accept very limited cases, and the current legal position means that many properties needing major works will still count as dwellings for SDLT.”

That summary reflects the modern approach. A property does not stop being a dwelling merely because it is run down, unsafe in some respects, lacking modern facilities, or in need of extensive renovation. The question is whether, at the effective date of the transaction, it was suitable for use as a dwelling under the statutory test as interpreted by the courts.

The Law

SDLT on land transactions is charged under the Finance Act 2003. Whether the residential rates apply depends in part on whether the subject matter includes a “dwelling”.

The key statutory provisions are in Schedule 4ZA to the Finance Act 2003, which defines a dwelling for SDLT purposes. Broadly, a building is a dwelling if:

• it is used or suitable for use as a single dwelling, or
• it is in the process of being constructed or adapted for such use.

The phrase “suitable for use as a dwelling” has generated a large amount of litigation. Earlier decisions sometimes allowed taxpayers to argue that a severely defective property fell outside the residential regime. However, the more recent authorities have narrowed that route considerably.

The leading current authority is Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Following that decision, the condition threshold in an uninhabitable or not suitable for use case is now relatively high.

The practical effect is that a property will usually still be treated as a dwelling even if it has significant defects, lacks some facilities, or requires substantial repair. The courts are now much less willing to treat disrepair or poor condition as enough on its own.

Analysis

To analyse whether a lower SDLT outcome is possible, the starting point is the state of the property on the effective date of the transaction, which is usually completion.

The following questions matter most:

1. Was there a building on the land that objectively had the character of a dwelling?

   If the property was plainly a house or flat, that is already a strong indication that the residential rules apply.

2. Was it still suitable for use as a dwelling at that date?

   This is not the same as asking whether it was pleasant, modern, mortgageable, or immediately fit for comfortable occupation. A property can still be a dwelling even if it has serious damp, defective services, damaged kitchens or bathrooms, broken heating, unsafe electrics, or needs major refurbishment.

3. Were the defects so fundamental that the building had effectively ceased to be suitable as a dwelling?

   After Mudan, this is a demanding test. In an uninhabitable / not suitable for use case, the condition thresholds are now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

4. Is the argument really about condition, or about redevelopment plans?

   A buyer’s intention to strip out, extend, or rebuild does not itself alter the SDLT position. The focus is on the actual condition of the property at the relevant date, not what the buyer planned to do afterwards.

In practice, many claims fail because the evidence shows a property that was derelict, neglected, or in poor repair, but still recognisably a dwelling capable of repair. The modern case law does not generally treat that as enough.

Only exceptional facts are likely to succeed. The strongest cases are likely to involve defects that go beyond severe disrepair and point to a building that truly could not function as a dwelling in any realistic sense at the effective date.

Even then, the evidence must be strong. Relevant material may include:

• survey reports from around completion
• photographs and videos dated to the transaction period
• contract papers and replies to enquiries
• local authority notices or structural reports
• evidence showing the absence or collapse of essential parts of the building
• proof that the condition existed at completion, not only after works began

Buyers should also remember that HMRC may challenge claims closely, and a weak claim can lead to delay, refusal, and possible dispute costs.

Outcome

The practical conclusion is that a buyer should no longer assume that a badly damaged or run-down property falls outside the residential SDLT rules.

Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold is now high. Most properties that are capable of repair and still retain the basic character of a dwelling are likely to be treated as dwellings for SDLT purposes.

So, unless the facts are truly exceptional, a refund or reduction claim based only on poor condition is now much less likely to succeed than many buyers expect.

Practical Steps

If you are assessing whether you may have overpaid SDLT, take these steps:

1. Obtain the SDLT return and completion statement from the original purchase.

2. Collect all evidence showing the property’s condition at completion, especially contemporaneous surveys and photographs.

3. Check whether the defects were repairable or whether they were said to be fundamentally destructive to the building’s use as a dwelling.

4. Review the position against the reasoning in Mudan, not older and more taxpayer-friendly summaries of the law.

5. Consider whether there are any other SDLT issues instead, such as mixed-use treatment or multiple dwellings relief in older transactions, rather than relying only on an uninhabitable argument.

6. Take specialist advice before submitting any amendment or repayment claim, because this is a technical and heavily contested area.

Conclusion

A property being in very poor condition does not automatically mean it was not a dwelling for SDLT. The courts now apply a stricter test, and the condition threshold is relatively high after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Any buyer considering a claim should examine the evidence carefully and proceed on the basis of the current law, not older assumptions.

Legal References Used

• Finance Act 2003
• Finance Act 2003, Schedule 4ZA
• 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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