Can HMRC Still Enquire Into an SDLT Refund for an Uninhabitable Property After Nine Months?

Introduction

Buyers sometimes reclaim Stamp Duty Land Tax (SDLT) on the basis that a property was not suitable for use as a dwelling at the effective date of the transaction. A common follow-up question is what happens after HMRC has paid the refund. Can HMRC still open an enquiry later, and does the answer depend on whether the property was genuinely uninhabitable?

This issue matters because there are really two separate questions. First, was the property legally “not suitable for use as a dwelling” when it was bought? Second, if HMRC has already repaid SDLT, how long does HMRC have to challenge the amended return or reclaim? Those questions are related, but they are not the same.

It is also important to understand that the legal threshold for saying a dwelling was not suitable for use has become much stricter. 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.

The Question

A taxpayer received SDLT refunds on two residential property purchases after claims were made on the basis that the properties were not suitable for use as dwellings. The taxpayer’s accountant then raised concerns that online marketing material and photographs suggested the properties were still habitable, and advised that the refunds should be repaid voluntarily.

The taxpayer wanted to know:

• what legal basis existed for the original refund claims;
• whether HMRC could still open an enquiry after the refunds had been paid; and
• whether there was any benefit in repaying the refunds before HMRC asked for them back.

Nick’s Explanation

Nick’s explanation had two main strands.

First, he said the refund claims had been made on the basis that the properties were treated as not suitable for use as dwellings because they were said to be too dangerous to live in and required more than basic renovation or repair. He also said that HMRC’s approach had become tougher from October 2024 onwards, so the legal landscape had shifted after many earlier claims were made.

In anonymised form, his position was:

“Refunds were based on the property being classified as not suitable for use as a dwelling because it was too dangerous to live in and required more than basic renovation or repair.”

He also said:

“At the time the case was submitted, case law supported the position that properties which were too dangerous to live in, and required more than standard renovation or repair, were not suitable for use as dwellings. HMRC accepted that position. Their approach only changed later, when the threshold was raised.”

Second, Nick took the view that HMRC’s ordinary enquiry window into an amended SDLT return had expired nine months after the refund decision, so he considered the practical risk of a later enquiry to be very low. He rejected the idea that there was any advantage in voluntarily repaying the refund where there had been no fraud or dishonesty.

In short, his reasoning was:

• the original claim depended on the property condition at the relevant date;
• the legal test for “not suitable for use as a dwelling” is now stricter than many people assumed before;
• HMRC normally has a limited enquiry window for SDLT returns and amendments; and
• voluntary repayment does not usually improve the taxpayer’s position if no formal challenge has been made.

The Law

SDLT is charged under the Finance Act 2003. Whether higher residential rates or non-residential/mixed rates apply depends on the nature of the subject matter acquired at the effective date of the transaction.

For these purposes, an important distinction is whether the property included a building that was “suitable for use as a dwelling”. If a building is not suitable for use as a dwelling at the relevant date, that can affect whether the transaction is treated as residential.

The legislation itself does not provide a simple checklist for suitability. The meaning has therefore been developed through case law.

Earlier tribunal decisions, including P N Bewley Ltd v HMRC [2019] UKFTT 65 (TC), were often relied on by taxpayers arguing that severe disrepair could mean a property was not suitable for use as a dwelling.

However, the modern position is now much narrower. The Court of Appeal in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 confirmed that the threshold is relatively high. In practical terms, ordinary disrepair, outdated condition, missing fittings, or the need for substantial renovation may still not be enough. The focus is on whether the building had defects so fundamental that it was not truly suitable for use as a dwelling at the effective date.

On HMRC’s ability to enquire into SDLT returns, Schedule 10 to the Finance Act 2003 sets out the enquiry regime. A notice of enquiry must generally be given within the statutory enquiry window. Where a return has been amended, the legislation contains specific time limits linked to the amendment. Separate rules may apply in cases involving discovery assessments, careless behaviour, or deliberate behaviour, but those are different routes and should not be confused with the ordinary enquiry window.

Analysis

The safest way to analyse this type of case is to separate the substantive SDLT issue from the procedural time limit issue.

Step 1: identify the legal basis of the reclaim.

The reclaim was based on the argument that, at completion, the property was not suitable for use as a dwelling. That is the only real basis on which a residential purchase of a house or flat can move into non-residential treatment because of condition.

Step 2: test the property condition against the correct threshold.

This is where many claims succeed or fail. A property does not become non-residential just because it needs work. The fact that a property is old, dated, missing a kitchen, in poor decorative order, or in need of repair is not enough by itself. Even serious renovation needs may not be enough.

Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold is now relatively high. A buyer would need to show defects going well beyond ordinary refurbishment or even major renovation. The closer the facts are to “this house needed updating” rather than “this building could not realistically function as a dwelling at all”, the weaker the reclaim.

Step 3: consider the evidence available.

In practice, evidence matters greatly. HMRC and advisers often look at:

• survey reports;
• photographs from the purchase date;
• auction packs and legal packs;
• estate agent particulars;
• builder quotations and invoices;
• environmental or safety reports; and
• evidence of whether the property could lawfully and physically be occupied.

Online listings can be relevant, but they are not conclusive. Estate agent language such as “requires updating” may point away from a successful claim, because it suggests the property was still basically a dwelling. On the other hand, a proper expert report identifying fundamental defects is usually much stronger evidence.

Step 4: consider HMRC’s enquiry powers separately.

The accountant’s point in the correspondence appears to have mixed the ordinary enquiry regime with longer time limits that may apply in other contexts. It is true that HMRC can in some circumstances assess tax outside the normal enquiry window, particularly where the statutory conditions for a discovery assessment or behaviour-based extension are met. But that does not mean every refund remains fully open to ordinary enquiry for six years as a matter of course.

For SDLT, the detail depends on exactly what was filed, when it was amended, and whether HMRC is seeking to use the ordinary enquiry route or a different statutory route. The ordinary enquiry time limit under Schedule 10 is important and should always be checked carefully against the filing history.

Step 5: ask whether voluntary repayment helps.

Usually, no obvious legal advantage arises from repaying a refund voluntarily when HMRC has not yet challenged it and there is no fraud or deliberate wrongdoing. If the claim was properly made on the facts and law as understood at the time, the better course is normally to keep the evidence organised and respond if HMRC raises a formal enquiry or assessment.

That said, if the taxpayer now concludes that the original factual basis was wrong, or that key information was inaccurate, the position changes and professional advice should be taken urgently.

Outcome

The practical answer is this:

• a refund claim for an allegedly uninhabitable property stands or falls on whether the property was genuinely not suitable for use as a dwelling at the effective date;
• that test is now difficult to satisfy, and the threshold is relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799;
• HMRC’s ordinary enquiry powers are subject to statutory time limits under Schedule 10 to the Finance Act 2003; and
• there is not usually any clear advantage in repaying a refund voluntarily before HMRC has made a formal challenge, unless the taxpayer now believes the claim was factually or legally unsound.

So the right question is not simply “can HMRC look again?” but “what statutory route would HMRC be using, and what evidence supports or undermines the original claim?”

Practical Steps

If you are in this position, take these steps:

1. Obtain the SDLT return, any amended return, and the exact dates they were filed.
2. Obtain the HMRC repayment date and any accompanying correspondence.
3. Gather all evidence showing the condition of the property at completion, especially surveyor evidence created close to that date.
4. Review the claim against the current case law, especially Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, rather than relying on older and more generous assumptions.
5. Check whether HMRC has actually opened an enquiry, issued an information request, or made any formal assessment. Concern alone is not the same as a live HMRC challenge.
6. If an adviser says HMRC is “within time”, ask them to identify the exact statutory provision they rely on: ordinary enquiry, amendment enquiry, discovery assessment, or behaviour-based assessment.
7. Do not assume that online property listings settle the issue. They are only part of the evidence picture.
8. If you are considering voluntary repayment, first establish whether the original claim was actually wrong, or whether the concern is simply that HMRC’s current view has become more restrictive.

Conclusion

An SDLT reclaim for an uninhabitable property depends on a strict legal test and strong evidence about the property’s condition at the purchase date. That test is now harder to satisfy than many earlier claimants expected, especially after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. If HMRC has already paid the refund, the next issue is procedural: whether HMRC is still within the correct statutory time limit to challenge it. Those are distinct questions, and both must be analysed carefully.

Legal References Used

• Finance Act 2003
• Finance Act 2003, Schedule 10
• P N Bewley Ltd v HMRC [2019] UKFTT 65 (TC)
• 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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