Can a Property Count as Non-Residential for SDLT Because It Was Used for Commercial Purposes?

Introduction

A common Stamp Duty Land Tax (SDLT) question is whether a property can be treated as non-residential, or mixed-use, because it was being used for something other than normal residential living at the time of purchase. This often comes up where a buyer believes the building was being used for business or commercial purposes, or where the property was in a poor state and not being occupied as a home.

The answer depends on the property’s true character at the effective date of the transaction. In practice, that means looking closely at what the property physically was, how it was actually being used, and whether there is strong evidence that it was not suitable for use as a dwelling. Where uninhabitable condition is relied on, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A buyer wants to know whether a property purchase might fall outside the normal residential SDLT rules because the property was said to be used for commercial purposes rather than as a dwelling. Evidence is being gathered to show that the use at the relevant time was not consistent with ordinary residential occupation.

Nick’s Explanation

Nick’s key point was that evidence is critical. The issue is not simply what the buyer or seller called the property, but whether there is convincing evidence that, at the relevant time, it was being used for purposes inconsistent with use as a dwelling.

In anonymised form, his point can be summarised like this: the buyer needs evidence showing that the property was used for “commercial” purposes, meaning purposes not in line with the property being used as a dwelling.

That reflects the way HMRC and the tribunals approach these cases. Labels alone do not decide SDLT treatment. The factual position does.

The Law

SDLT is charged under the Finance Act 2003. Whether residential or non-residential rates apply depends on the nature of the land acquired.

Broadly:

• Residential property 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.
• Non-residential property includes land or buildings that do not fall within the residential definition.
• Mixed-use treatment may apply where the transaction includes both residential and non-residential elements.

The key statutory provisions are in Finance Act 2003, section 116 and related SDLT provisions dealing with residential property and non-residential property.

For a building to avoid being treated as residential, it is usually not enough that it was empty, neglected, or in need of repair. The main questions are:

• Was it still suitable for use as a dwelling at the effective date?
• Was it actually being used in a way inconsistent with residential use?
• If mixed-use is argued, was there genuinely non-residential land or property included in the transaction?

Where a buyer argues that the property was uninhabitable or not suitable for use as a dwelling, recent case law has made clear that the threshold is demanding. In Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the Court of Appeal confirmed that the condition thresholds are now relatively high. Serious disrepair does not automatically prevent a building from being “suitable for use as a dwelling” for SDLT purposes.

Analysis

The issue should be analysed in stages.

First, identify the effective date of the transaction. SDLT treatment is judged at that date, usually completion unless the rules provide otherwise. Evidence from long before or long after that date may help, but the central question is the property’s character at the effective date.

Second, consider the physical nature of the building. If the property still had the basic character of a house or flat and could function as living accommodation, HMRC is likely to argue that it remained residential. Missing fittings, poor repair, or temporary vacancy will not necessarily change that.

Third, consider actual use. If the property was genuinely being used for commercial purposes, the evidence should show that clearly. Relevant evidence may include:

• planning records or enforcement material
• business rates material, if applicable
• licences, consents, or regulatory records
• photographs showing commercial fit-out or business use
• invoices, contracts, or trading records linked to the property
• witness evidence from those with direct knowledge of use at the time
• marketing particulars describing the property’s use or condition

Fourth, test whether the use was truly inconsistent with use as a dwelling. This is important. A property does not stop being residential merely because some business activity took place there. Many dwellings are used partly for work or storage. To move outside the residential category, the evidence usually needs to show that the property was not being used as a home and that its use was materially inconsistent with residential occupation.

Fifth, distinguish commercial use from disrepair. These are different arguments. A property may be in bad condition but still be residential. Equally, a property may be structurally sound but used in a way that supports a non-residential analysis. If the argument is based on condition rather than use, Mudan makes the buyer’s task harder because the courts now require a high level of unsuitability before a building will cease to be a dwelling for SDLT purposes.

Finally, consider whether the case is really about mixed-use rather than wholly non-residential treatment. Sometimes the building itself remains residential, but another part of the land may arguably be non-residential. That requires a separate factual and legal analysis.

Outcome

A buyer cannot usually secure non-residential SDLT treatment simply by saying that a property was being used commercially. The question is evidence-based and fact-sensitive.

If the evidence shows that, at the effective date, the property was genuinely being used for purposes inconsistent with use as a dwelling, that may support a non-residential or mixed-use position. But if the property still had the character of a dwelling, and the alleged commercial use was limited, informal, or compatible with ordinary residential occupation, HMRC is likely to treat it as residential.

If the argument instead relies on the property being uninhabitable, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Practical Steps

Anyone assessing this issue should:

• identify the SDLT effective date
• gather contemporaneous evidence of actual use at that date
• separate evidence of commercial use from evidence of mere disrepair
• review whether the use was truly inconsistent with use as a dwelling
• check whether the better argument is mixed-use rather than wholly non-residential treatment
• compare the facts against the high threshold confirmed in Mudan if unsuitability for use as a dwelling is being argued
• keep photographs, correspondence, records, and any third-party documents that support the factual position

Because SDLT classification disputes are highly fact-specific, the strength of the evidence often determines the result.

Conclusion

A property will not usually fall outside the residential SDLT rules unless the buyer can show, with solid evidence, that it was either not suitable for use as a dwelling or was genuinely being used in a way inconsistent with residential occupation. Poor condition alone is often not enough, and after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold for proving unsuitability is relatively high.

Legal References Used

• Finance Act 2003
• Finance Act 2003, section 116
• 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.