SDLT on run‑down “uninhabitable” houses after Mudan
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Can a derelict property with no kitchen, bathroom or services be treated as non-residential for SDLT?
Introduction
People often ask whether a run-down house can be treated as non-residential for Stamp Duty Land Tax (SDLT) because it was in very poor condition when bought. This usually comes up where the buyer paid the higher residential rates and later wonders whether the property was actually not suitable for use as a dwelling at completion.
The issue matters because, if a building is not a dwelling at the effective date of the transaction, the SDLT treatment may be different. But the legal test is strict, and recent case law has made clear that the threshold for showing a property was not suitable for use as a dwelling is now relatively high.
The Question
A buyer purchased a property for £63,000 and paid SDLT at 5%, amounting to £3,150. The property had no connected services, no working kitchen or bathroom, and there were exposed live electrical cables. No survey was obtained before purchase. The buyer wanted to know whether those facts meant the property was unsuitable for use as a dwelling, so that a different SDLT treatment might apply.
Nick’s Explanation
Nick’s view was that, on the facts provided, HMRC would be unlikely to accept that the property was unsuitable for use as a dwelling at the time of purchase.
In anonymised form, his answer was essentially this: based on the condition issues described, HMRC would probably not accept that the building fell outside the definition of a dwelling. He also noted that SDLT is a self-assessed tax, so the buyer must consider the facts and relevant case law carefully before deciding whether a claim is genuinely supportable.
That is a sensible summary of the current position. Serious disrepair does not automatically mean a building stops being a dwelling for SDLT purposes. The question is not whether the property was unpleasant, unsafe in some respects, or in need of substantial renovation. The question is whether, at the effective date of the transaction, it was suitable for use as a dwelling applying the legal test developed by the courts.
The Law
SDLT on land transactions is charged under the Finance Act 2003. Whether property is taxed as residential or non-residential 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 deals with higher rates for additional dwellings, and section 116 of the Finance Act 2003, which contains the meaning of “residential property”. Broadly, residential property includes land that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use.
In cases about derelict or damaged buildings, the courts have focused on whether the property was suitable for use as a dwelling at the effective date of the transaction. That is a fact-sensitive question, but the courts have repeatedly said that the threshold for unsuitability is not low.
Importantly, in an uninhabitable or 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.
That decision reinforces the wider line of authority that a building can remain a dwelling even if it lacks some facilities, needs major works, or cannot lawfully or practically be occupied immediately without repair. The courts distinguish between a property that is in poor condition and a property that has truly ceased to be suitable for use as a dwelling.
Analysis
Applying those principles step by step:
The starting point is that the property appears to have been a house or other dwelling-type building. That means the buyer would need strong evidence to show it was no longer suitable for use as a dwelling at completion.
The absence of connected services is relevant, but not decisive. A lack of live utilities may show serious disrepair or temporary unusability, but it does not necessarily mean the building has lost its character as a dwelling.
The absence of a working kitchen or bathroom is also relevant, but again not conclusive. Case law shows that missing or defective domestic facilities do not automatically take a property outside the dwelling definition. The courts ask whether the building, viewed realistically, remains suitable for residential use in character and function, even if repairs are needed.
Exposed live electrical cables and dangerous conditions can support an argument that the property was not fit for immediate occupation. But “not fit for immediate occupation” is not always the same as “not suitable for use as a dwelling” for SDLT purposes. That distinction is central to many failed claims.
The lack of a survey creates an evidential weakness. If a buyer later argues that a property was not suitable for use as a dwelling, contemporaneous evidence is extremely important. That may include a survey, valuation, photographs, contractor reports, utility records, lender correspondence, auction particulars, and completion-date evidence showing the true state of the property.
The amount of SDLT paid suggests the higher residential rates were applied. If that was correct at the time, any later amendment or refund claim would need to be supported by a robust legal basis and strong evidence.
Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the hurdle is now relatively high. A property generally needs to be in a more fundamentally non-residential state before it will fall outside the dwelling definition. Serious neglect, absence of fittings, and disconnection of services may still not be enough.
On these facts alone, the better view is that the property was still likely to be treated as residential property containing a dwelling, even though it was in very poor condition and required substantial works.
Outcome
The practical conclusion is that a property with no working kitchen or bathroom, disconnected services, and dangerous electrics will not automatically qualify as non-residential for SDLT. On the facts described, HMRC would be unlikely to accept that the building was unsuitable for use as a dwelling.
In other words, paying residential SDLT, including the higher rates where applicable, was likely to be the safer treatment unless much stronger evidence existed showing that the building had truly ceased to be a dwelling at the effective date.
Practical Steps
If you are assessing a similar case, the sensible next steps are:
Gather contemporaneous evidence from the purchase date, including photographs, auction particulars, legal pack papers, utility information, mortgage or valuation documents, and contractor reports.
Check exactly what SDLT treatment was applied on the return and why, including whether the higher rates for additional dwellings were used.
Review the condition of the property against the statutory test of whether it was suitable for use as a dwelling at the effective date of the transaction, not merely whether it needed renovation.
Compare the facts carefully with the current case law, especially Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
If considering an amendment or refund claim, make sure the argument is evidence-led and realistic. Weak “uninhabitable property” claims are commonly challenged.
Where the evidence is borderline, obtain specialist SDLT advice before filing or amending a return.
Conclusion
A derelict or dangerous property is not necessarily non-residential for SDLT. The legal test is whether it was suitable for use as a dwelling at the time of purchase, and that is now a demanding threshold. On facts like these, the property would usually still be treated as residential.
Legal References Used
- Finance Act 2003, section 116
- 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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