Is the Mudan decision binding for SDLT uninhabitable property claims?

Introduction

People searching this issue usually want to know whether HMRC and taxpayers must follow the Mudan decision when arguing that a property was not suitable for use as a dwelling at the effective date of a transaction. This matters because the answer can affect whether residential rates of Stamp Duty Land Tax apply and whether a refund or amendment is realistic.

The short answer is that an Upper Tribunal decision is generally binding on the First-tier Tribunal unless and until it is overturned or displaced by a higher court. However, readers also need to know that the legal position on “uninhabitable” cases is now much stricter following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A taxpayer involved in an SDLT dispute received correspondence from HMRC acknowledging an argument about the Mudan appeal. HMRC’s position was that the Upper Tribunal decision in Mudan remained legally binding unless changed by the Court of Appeal. The practical question is: what does that mean for someone arguing that a property was not suitable for use as a dwelling on completion?

Nick’s Explanation

The key point made in the exchange was that HMRC accepted the ordinary position on precedent: the Upper Tribunal’s decision in Mudan remained binding unless changed by the Court of Appeal.

Put simply, the reasoning can be expressed like this: where there is a relevant Upper Tribunal authority on the SDLT treatment of a dwelling said to be uninhabitable, that authority must generally be followed by lower tribunals unless a higher court changes the law.

That is important because many SDLT claims in this area have turned on whether poor condition, missing facilities, disrepair or renovation needs were serious enough to mean the property was not suitable for use as a dwelling. The courts have increasingly treated that threshold as a demanding one.

The Law

SDLT on land transactions is charged under the Finance Act 2003. Whether property counts as “residential property” depends in part on whether it is used as a dwelling or is suitable for use as a dwelling at the relevant time.

The legislation does not reduce the test to a simple checklist. Instead, the courts have had to decide what “suitable for use as a dwelling” means in real cases. That has produced a line of authority addressing properties in disrepair, derelict properties, buildings requiring renovation, and properties said to be incapable of normal occupation.

As a matter of precedent:

• the Court of Appeal binds the Upper Tribunal, the First-tier Tribunal and HMRC on points of law;
• the Upper Tribunal generally binds the First-tier Tribunal unless and until a higher court decides otherwise; and
• HMRC will usually apply the law as stated in binding appellate authority.

In this area, the significance of Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 is that it raises and clarifies the threshold for proving that a property was not suitable for use as a dwelling. In an uninhabitable or not suitable for use case, the condition thresholds are now relatively high following that Court of Appeal decision.

Analysis

The issue can be analysed in four steps.

First, identify the legal test. The question is not whether the property was attractive, modern, mortgageable, or ready for immediate comfortable occupation. The question is whether, at the effective date of the transaction, it was suitable for use as a dwelling in the legal sense.

Second, separate serious incapacity from ordinary disrepair. A property may need substantial work, renovation, rewiring, a new kitchen, a new bathroom, damp treatment, heating repairs, or structural attention and still remain suitable for use as a dwelling. The courts have repeatedly resisted treating poor condition alone as enough.

Third, consider the effect of appellate authority. If an Upper Tribunal decision states the applicable approach, the First-tier Tribunal is expected to follow it. If the Court of Appeal later addresses the same issue, the Court of Appeal’s judgment becomes the controlling authority. That is why the statement that the Upper Tribunal decision is binding “unless changed by the Court of Appeal” is legally orthodox.

Fourth, apply the current position after Mudan. The Court of Appeal’s decision in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 means that arguments based on unsuitability now face a relatively high threshold. The fact that a property was inconvenient to live in, in poor repair, unsafe in some respects, or in need of major works will not automatically take it outside the residential property rules. The condition must be sufficiently serious to show that the building was not suitable for use as a dwelling at all at the relevant date.

In practical terms, many claims that once focused on missing fixtures, outdated condition, or extensive renovation costs will now be harder to sustain unless the evidence shows a much more fundamental inability to function as a dwelling.

Outcome

The practical conclusion is this: if you are relying on an “uninhabitable” argument for SDLT, you should assume that the legal threshold is demanding. An Upper Tribunal decision on the point was binding unless altered by a higher court, and the Court of Appeal in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 has now made clear that the condition threshold is relatively high.

So, a taxpayer should not assume that serious disrepair, renovation needs, lack of modern facilities, or even temporary non-occupation will be enough on their own.

Practical Steps

If you need to assess your position, the sensible steps are:

• identify the exact condition of the property on the effective date of the transaction, not before or after;
• gather contemporaneous evidence, such as surveys, photographs, contractor reports, insurance records and completion documents;
• separate evidence of inconvenience or poor condition from evidence showing genuine unsuitability for use as a dwelling;
• check whether the facts show a fundamental lack of residential functionality rather than a need for repair or refurbishment;
• review the reasoning in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 carefully before making or maintaining a claim; and
• consider whether any earlier advice or assumptions need to be revisited in light of the Court of Appeal’s stricter approach.

Conclusion

The key takeaway is that precedent matters, and so does the level of disrepair. The Mudan line of authority confirms that lower tribunals must follow binding appellate decisions, and the Court of Appeal has now confirmed a relatively high threshold for showing that a property was not suitable for use as a dwelling for SDLT purposes.

Legal References Used

• Finance Act 2003
• 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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