Can you still claim non-residential SDLT rates because a property was uninhabitable?

Introduction

Buyers sometimes ask whether a run-down house can be treated as non-residential for Stamp Duty Land Tax purposes because it was allegedly not suitable for use as a dwelling on the purchase date. This usually happens where the property had damp, outdated electrics, heating problems, uneven floors, missing certificates, or a need for refurbishment.

The difficulty is that the legal threshold is now high. A property does not become non-residential simply because it needs repair, renovation or modernisation. Following recent case law, only a relatively small group of properties will fall outside the residential SDLT rules on the basis that they were not suitable for use as a dwelling.

The Question

A company bought a house and later claimed that too much SDLT had been paid because the building was not suitable for use as a dwelling at the effective date of the transaction. The evidence relied on included a survey, photographs, repair quotations, and concerns about damp, electrics, drainage, heating, possible asbestos, and general condition.

HMRC opened a compliance check and concluded that the building was still residential. The issue is whether defects of this kind are enough to disapply the residential SDLT rates.

Nick’s Explanation

Nick’s reasoning, put into general terms, is that the key question is not whether the property was attractive, modern, mortgageable, or ready for immediate occupation. The question is whether, viewed objectively at the purchase date, it was still suitable for use as a dwelling.

In summary, his explanation is that:

• repair needs do not usually stop a building being a dwelling for SDLT purposes;
• previous use as a home is a strong indicator that the building retains the fundamental characteristics of a dwelling;
• evidence such as damp, outdated electrics, heating defects, flooring problems, missing certificates and moderate refurbishment costs will often be treated as showing disrepair, not unsuitability;
• the courts now set a relatively demanding test for proving that a property was not suitable for use as a dwelling.

As Nick would put it in substance, the law distinguishes between a property that needs work and a property that has crossed the line into being genuinely unsuitable as a dwelling. That line is now harder to establish than many buyers assume.

The Law

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

For these purposes, a building is generally residential property if it is used as a dwelling or is suitable for use as a dwelling. The issue often turns on the meaning of “suitable for use as a dwelling” at the effective date of the transaction.

HMRC’s published guidance at SDLTM00385 states that a property may still be residential even if it requires repair, renovation or modernisation. The guidance also draws a distinction between a truly derelict building and one that remains fundamentally capable of residential use.

The case law has developed this area significantly. Important authorities include:

• PN Bewley Ltd v HMRC [2019] UKFTT 65 (TC)
• Fish Homes Ltd v HMRC [2020] UKFTT 180 (TC)
• Fiander, Brower and another v HMRC [2020] UKFTT 190 (TC)
• Henderson Acquisitions Ltd v HMRC [2023] UKFTT 739 (TC)
• A & T Mudan v HMRC [2024] UKUT 307 (TCC)
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

The current position is that the condition thresholds in an uninhabitable or not suitable for use case are now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Analysis

The practical analysis usually works in the following order.

First, ask what the property physically was on the effective date of the transaction. If it was recognisably a house or flat with the basic character of a dwelling, that points strongly towards residential treatment.

Second, ask whether it had previously been used as a home. If the answer is yes, that is a major factor. The Upper Tribunal in A & T Mudan v HMRC [2024] UKUT 307 (TCC) treated prior residential use as a very strong indicator that the building possessed the fundamental characteristics of a dwelling.

Third, consider the nature of the defects. Problems such as damp, tired finishes, rewiring, heating replacement, plaster damage, roof works, flooring issues, drainage concerns, or the temporary absence of kitchen or bathroom elements will not usually be enough on their own. Those matters often show that the property needs work, but not that it has ceased to be suitable for use as a dwelling.

Fourth, consider whether the defects were so severe that a reasonable person would say the property was too dangerous to live in, or that repair or renovation could not sensibly proceed without first dealing with exceptional hazards or structural failure. That is the sort of reasoning seen in PN Bewley Ltd v HMRC [2019] UKFTT 65 (TC), which remains an unusual case on its own facts.

Fifth, look at the quality of the evidence. General survey comments, repair recommendations, and modest quotations may not be enough. Stronger evidence would usually include detailed expert reports, evidence of structural unsoundness, evidence that works could not safely be carried out without major preliminary intervention, local authority action, or proof that the building had effectively lost the essential character of a dwelling.

Applying those principles to a case involving damp, old electrics, heating issues, uneven floors, possible asbestos, and a moderate repair budget, HMRC is likely to say that the building remained residential unless the evidence shows something much more serious. That approach is consistent with Fish Homes, Fiander, Henderson, the Upper Tribunal decision in Mudan, and now the Court of Appeal decision in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

In short, the law does not ask whether the property was comfortable, compliant with modern expectations, or ready for immediate occupation. It asks whether it was still suitable for use as a dwelling in the relevant legal sense. That is a stricter test for the taxpayer than many expect.

Outcome

The practical conclusion is that a property in fair or even poor condition will often still be treated as residential for SDLT. Needing renovation is not enough. Unless the defects were exceptional and fundamentally undermined the building’s suitability as a dwelling, residential rates are likely to apply.

Where the property had clearly been lived in before, remained structurally usable, and only required repair or upgrading, a claim for non-residential treatment is unlikely to succeed.

Practical Steps

If you are assessing a similar SDLT position, the sensible steps are:

• identify the exact effective date of the transaction;
• gather all contemporaneous evidence from that date, including survey reports, photographs, contractor reports, valuations, and sales particulars;
• separate ordinary repair issues from truly exceptional defects;
• consider whether the property had been occupied as a dwelling in the recent past;
• check whether there is evidence of structural danger, inability to carry out works safely, or circumstances comparable to Bewley rather than routine disrepair cases;
• review HMRC guidance at SDLTM00385 alongside the case law, especially A & T Mudan v HMRC [2024] UKUT 307 (TCC) and Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799;
• if HMRC has issued a closure notice, review the appeal deadline immediately and decide whether the evidence is strong enough to challenge the decision.

In many cases, the decisive point is the quality of the evidence at the purchase date rather than the amount later spent on improvements.

Conclusion

A property is not treated as non-residential for SDLT just because it needed work. The present legal position is that the threshold for showing a building was not suitable for use as a dwelling is relatively high, especially after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Unless the defects were truly exceptional, residential SDLT rates will usually still apply.

Legal References Used

• Finance Act 2003
• HMRC SDLT Manual, SDLTM00385
• PN Bewley Ltd v HMRC [2019] UKFTT 65 (TC)
• Fish Homes Ltd v HMRC [2020] UKFTT 180 (TC)
• Fiander, Brower and another v HMRC [2020] UKFTT 190 (TC)
• Henderson Acquisitions Ltd v HMRC [2023] UKFTT 739 (TC)
• A & T Mudan v HMRC [2024] UKUT 307 (TCC)
• 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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