Can you reclaim SDLT if you buy a property that needs a full refurbishment?

Introduction

People often ask whether stamp duty land tax (SDLT) can be reduced or reclaimed where a property is in very poor condition and needs major works. The issue usually arises where a buyer is told by their conveyancer to pay SDLT at normal residential rates, but later hears that a refund may be possible if the property was not suitable for use as a dwelling at the effective date of the transaction.

This area of law is highly fact-sensitive. A property does not become non-residential just because it needs modernisation, repair, or even extensive refurbishment. The legal threshold for showing that a dwelling was not suitable for use is now relatively high, particularly following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A buyer is about to complete on a property that requires a complete refurbishment. They want to know whether they can “claim back” SDLT after completion, or whether the property can instead be treated as non-residential from the outset because of its condition.

Nick’s Explanation

Nick’s reply identified three broad possibilities where a buyer is purchasing a property in poor condition:

• pay SDLT on the basis the conveyancer considers correct at completion;
• pay SDLT first and then consider a reclaim on the basis that the property was not habitable and therefore not residential;
• treat the property as non-residential at completion and pay SDLT at non-residential rates from the start.

In anonymised form, his key point was that if the property is genuinely in sufficiently poor condition, there may be scope either to reclaim SDLT after payment or to assess the purchase as non-residential at completion. However, the second route may involve professional fees, and the third route can carry greater risk if HMRC later disagrees with the analysis.

The important underlying message is that the answer depends on the condition of the property at completion, not on the buyer’s future renovation plans or the scale of the works they intend to carry out.

The Law

SDLT is charged under the Finance Act 2003. Whether residential rates apply depends on whether the subject matter of the transaction consists of residential property at the effective date of the transaction.

The key statutory provisions are:

• Finance Act 2003, section 55, which sets the rates of SDLT;
• Finance Act 2003, section 116, which defines “residential property”.

Under section 116, residential property includes:

• a building that is used or suitable for use as a dwelling; or
• land that forms part of the garden or grounds of such a building.

If a building is not used or suitable for use as a dwelling at the effective date, it may fall outside the residential definition. In some cases that means the purchase is taxed at non-residential or mixed rates rather than residential rates.

The dispute in these cases usually centres on the meaning of “suitable for use as a dwelling”. The courts have made clear that this is an objective test applied to the property’s actual condition at the relevant date.

Recent appellate authority is especially important. In Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the Court of Appeal confirmed that the threshold for showing a property is not suitable for use as a dwelling is relatively high. Serious disrepair does not automatically mean the property is non-residential. The question is whether, viewed realistically and objectively, the building had ceased to be suitable for use as a dwelling at the effective date.

Analysis

The rules should be applied in stages.

First, ask what the property was like on the date of completion. That is the critical date for SDLT. It is not enough that the buyer plans to strip out kitchens, bathrooms, wiring, plaster, or flooring after completion. The test looks at the property as it actually stood at the effective date.

Second, distinguish between a property that is merely dated or run down and one that is truly not suitable for use as a dwelling. A property can still be residential even if it has:

• old or poor-quality fittings;
• significant cosmetic issues;
• damp, leaks, or disrepair;
• an outdated kitchen or bathroom;
• heating defects;
• a need for substantial renovation.

Those features may show that the property needs work, but not necessarily that it has crossed the legal line into being unsuitable for use as a dwelling.

Third, consider whether there were fundamental defects affecting habitability or suitability. Relevant points may include whether the property had functioning basic facilities, whether it could be occupied as a home in its actual condition, and whether any defect was so serious that the building had effectively lost its character as a dwelling for SDLT purposes.

Fourth, remember that the legal threshold is now relatively demanding. Following Mudan, buyers should be cautious about assuming that a “full refurb” means the property was non-residential. Many properties bought for complete renovation are still residential for SDLT purposes.

Fifth, consider the practical routes available:

• If SDLT is paid at residential rates on completion, a buyer may later amend or reclaim if there is a proper legal basis for saying the property was not suitable for use as a dwelling.
• Alternatively, a buyer may file on a non-residential basis at completion, but that approach carries obvious risk if HMRC later opens an enquiry and concludes that the property was in fact residential.

In either route, evidence is critical. Useful material may include a survey, photographs, completion-day condition reports, contractor evidence, mortgage valuation material, and any contemporaneous documents showing the state of the property at the effective date.

Outcome

A buyer cannot assume that SDLT can be reclaimed simply because the property needs extensive refurbishment. The key issue is whether, at completion, the building was objectively not suitable for use as a dwelling.

If the property was merely in poor or outdated condition, residential SDLT rates are likely still to apply. If the defects were so serious that the building had genuinely ceased to be suitable for use as a dwelling, there may be scope either for a reclaim after payment or for non-residential treatment. But following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition threshold is relatively high.

Practical Steps

If you are assessing this issue before or shortly after completion, the sensible steps are:

• review the property’s condition as at the effective date, not after works began;
• gather dated photographs, survey reports, and any contemporaneous evidence;
• identify whether basic living facilities existed and were usable;
• consider whether any defects were structural or fundamental rather than simply repair-related;
• check how the SDLT return was or will be filed;
• take specialist advice before filing on a non-residential basis or making a reclaim.

Where SDLT has already been paid, the viability of a reclaim will depend on the evidence and on whether the facts can genuinely meet the legal test. Where completion has not yet taken place, the filing position should be considered carefully in advance because the risk profile differs depending on the approach taken.

Conclusion

A property needing a complete refurb is not automatically non-residential for SDLT. The real question is whether it was suitable for use as a dwelling at completion. That is now a demanding test, and after Mudan only genuinely serious cases are likely to succeed.

Legal References Used

• Finance Act 2003, section 55
• 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.