Can you reclaim SDLT on a derelict or uninhabitable property after Mudan v HMRC [2025]?

Introduction

Many buyers ask whether a run-down property can be taxed at non-residential SDLT rates instead of residential rates. The issue usually arises where the building was in poor condition at completion and the buyer believes it was not fit to live in.

This question matters because the SDLT difference can be substantial, especially on higher-value purchases. But the legal test is narrower than many people assume. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold for saying a property was not suitable for use as a dwelling is now relatively high.

The Question

A buyer of a derelict residential property wants to know whether they may be entitled to SDLT treatment on the basis that the property was not suitable for use as a dwelling at the effective date of the transaction. They have seen suggestions that serious disrepair, unsafe services, or major refurbishment needs can make a property non-residential for SDLT purposes and may support a refund claim.

They are also concerned about whether the Court of Appeal decision in Mudan v HMRC supports that view, and whether the same reasoning automatically applies in Scotland and Wales.

Nick’s Explanation

Nick’s position, in substance, was that any article on this topic should be reviewed carefully against the current case law and that precise wording matters. That is the right approach. In this area, small differences in fact and wording can change the result.

The key legal point, however, is that Mudan should not be read as opening the door to broad SDLT refund claims for properties in disrepair. The safer summary is the opposite: the Court of Appeal confirmed a restrictive approach.

In anonymised form, the central point can be put this way: a property does not cease to be a dwelling simply because it is in poor condition, requires extensive repairs, or cannot be occupied immediately. The question is whether, viewed objectively at the effective date of the transaction, it still had the fundamental character of a dwelling and was suitable for use as one in the legal sense.

That means many properties described in everyday language as “derelict”, “uninhabitable” or “not mortgageable” may still count as residential property for SDLT.

The Law

For SDLT, the starting point is the Finance Act 2003. Residential rates generally apply to purchases of residential property. A building is usually treated as residential property if it is used as a dwelling, is suitable for use as a dwelling, or is in the process of being constructed or adapted for such use.

The statutory wording is important because it focuses on whether the property is “suitable for use as a dwelling”, not whether it is immediately comfortable, modern, or ready for occupation without works.

The courts have considered this wording in a number of cases. The modern line of authority includes Ladson Preston Ltd v HMRC and, more recently, Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. These cases show that the test is objective and fact-sensitive, but not generous to taxpayers.

After Mudan, the condition threshold in an uninhabitable or not suitable for use case is now relatively high. Serious disrepair is not enough by itself. The defects generally need to go well beyond ordinary refurbishment issues and may need to show that the building had lost the essential character of a dwelling or was not realistically capable of residential use except by something more fundamental than repair.

It is also important not to confuse SDLT with devolved property taxes. Scotland has LBTT and Wales has LTT. Decisions on SDLT are often persuasive when similar wording is used, but they are not automatically binding in the same way on devolved taxes.

Analysis

When analysing whether a claim may succeed, it helps to work through the issue in stages.

1. Identify the property as it existed on completion

   The legal test is applied at the effective date of the transaction, usually completion. Later works, later surveys, or later deterioration may have limited value unless they show the true condition at that date.

2. Ask whether the building still had the character of a dwelling

   If the property was recognisably a house or flat, with its structure largely intact, the courts may still regard it as a dwelling even if it needed substantial work. Missing fittings, outdated kitchens or bathrooms, defective wiring, leaks, damp, or lack of heating do not automatically take it outside the residential rules.

3. Separate major disrepair from legal unsuitability

   There is a difference between a property that is inconvenient, unsafe without repair, or not immediately habitable, and a property that is legally not suitable for use as a dwelling. Mudan indicates that “suitable for use” is not the same as “ready to move into today”. The courts look at the nature and extent of the defects in the round.

4. Consider how extreme the defects really were

   Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold is relatively high. A successful case is more likely to involve truly exceptional conditions rather than a neglected refurbishment project. If the property required ordinary repair, reinstatement, or renovation, that will often still leave it within the residential SDLT regime.

5. Check whether the argument is really about mixed use instead

   Some buyers focus on habitability when the stronger issue may actually be mixed-use treatment, such as land or buildings used for non-residential purposes. That is a different analysis and should not be confused with a pure “not suitable for use as a dwelling” claim.

6. Assess evidence carefully

   Claims in this area need strong contemporaneous evidence: survey reports, photographs, auction particulars, contractor evidence, lender correspondence, and completion-date records. Assertions made later, without objective evidence from the relevant date, are often weak.

7. Remember the procedural and risk issues

   If a refund claim is made, HMRC may enquire into it. If the legal basis is weak or the facts are overstated, there may be exposure to repayment demands, interest, and potentially penalties depending on the circumstances.

So the practical lesson from Mudan is not that derelict-property refunds are widely available. It is that most such claims will face a demanding legal test, and many properties in poor condition will still be treated as dwellings.

Outcome

The main conclusion is this: buying a run-down, unsafe, or heavily damaged home does not by itself mean non-residential SDLT rates apply.

After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the bar for proving that a property was not suitable for use as a dwelling is relatively high. Most properties that still retain the essential character of a home, even if they need extensive works, are likely to remain residential for SDLT.

It is therefore wrong to assume that a derelict property purchase automatically creates a refund opportunity. In many cases it will not.

Practical Steps

1. Obtain the completion-date evidence

   Gather photographs, surveys, auction packs, legal packs, lender reports, and contractor assessments that show the exact state of the property at completion.

2. Review the statutory test, not just estate-agent language

   Descriptions such as “uninhabitable”, “derelict”, or “cash buyers only” are not legal tests. The question is whether the property was suitable for use as a dwelling for SDLT purposes.

3. Compare the facts with the case law

   Read the facts and reasoning in Mudan and other relevant authorities carefully. The detail matters.

4. Check whether the real issue is mixed use

   If the property included commercial elements, agricultural land, or other non-residential features, that may be a separate route to consider.

5. Consider time limits

   Any amendment or repayment route depends on the procedural history and timing of the transaction. Delay can remove options.

6. Do not assume England, Scotland, and Wales are identical

   SDLT applies in England and Northern Ireland. Scotland and Wales have separate devolved taxes, so the legal analysis may not transfer directly.

7. Take a realistic view of risk

   If the facts are borderline, a claim may be challenged. The stronger the evidence of truly exceptional condition at completion, the better the prospects. If the case is really about extensive refurbishment rather than loss of dwelling character, the position is much weaker.

Conclusion

A property in serious disrepair is not automatically non-residential for SDLT. The Court of Appeal in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 confirms that the threshold is now relatively high in “not suitable for use as a dwelling” cases. In practice, many derelict residential purchases will still be taxed as residential property, and any refund claim should be tested carefully against the statute and the current authorities.

Legal References Used

• Finance Act 2003
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799
• Ladson Preston Ltd v HMRC

This page was last updated on 22 March 2026.

See all questions and answers categorized in this sitemap. Or use Google site search below.