Can a linked purchase of several flats be treated as mixed-use for SDLT if one flat is uninhabitable?

Introduction

Buyers sometimes ask whether Stamp Duty Land Tax (SDLT) can be reduced where one property in a purchase is in very poor condition. The question becomes more complicated where several dwellings are bought together as linked transactions. A common argument is that if one flat is not suitable for use as a dwelling, that part of the purchase may be non-residential, which could affect the SDLT treatment of the whole transaction.

This is an area where the facts matter a great deal. It is also an area where recent case law has made the threshold for saying a dwelling is uninhabitable much harder to meet. In particular, in an uninhabitable or not suitable for use case, the condition thresholds are now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A buyer is acquiring four apartments as part of one linked transaction for about £600,000. One of the apartments is said to be in such poor condition that it may be uninhabitable because of serious hazards and safety issues. The buyer wants to know whether that could mean:

• that apartment is treated as non-residential for SDLT purposes, and
• the linked purchase as a whole is then treated as mixed-use and taxed at non-residential SDLT rates.

The buyer also wants to understand the practical risk if HMRC later challenges that treatment.

Nick’s Explanation

Nick’s core point was that there may be an argument for mixed-use treatment if one of the flats is genuinely not suitable for use as a dwelling at the effective date of the transaction. In anonymised form, his reasoning was:

“You are purchasing four apartments as part of a linked transaction. If one apartment is uninhabitable, it may be treated as non-residential for stamp duty purposes. If that is right, the linked transaction may be treated as mixed-use and taxed at non-residential rates.”

He also made an important cautionary point. In anonymised form, he said:

“This is complex and requires careful consideration. If the property is self-assessed on that basis and there is not a strong case for saying one apartment was uninhabitable due to hazardous conditions, HMRC may challenge the filing, seek the higher SDLT, charge interest, and possibly consider penalties.”

He further noted that a cautious approach may be to pay SDLT on the higher basis first and then consider a reclaim if the evidence strongly supports a lower liability.

The Law

SDLT is charged under the Finance Act 2003. The amount payable depends on the nature of the subject matter acquired and whether the transaction is residential, non-residential, or mixed.

A transaction is generally residential if the main subject matter consists of:

• 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 the transaction includes both residential and non-residential property, it may be a mixed transaction, and non-residential SDLT rates may apply.

Where multiple transactions are linked, the legislation requires them to be considered together for rate-setting purposes. That can matter where several flats are acquired from the same seller, or as part of one overall arrangement.

The difficult question is whether a particular flat is “suitable for use as a dwelling” at the effective date of the transaction. That is a legal and factual question. It is not enough that the property is dated, in need of repair, or inconvenient to occupy. The courts have repeatedly treated the test as a demanding one.

The most important recent authority is Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That decision confirms that the threshold for saying a property is not suitable for use as a dwelling is relatively high. Serious disrepair alone will not always be enough. The condition must be such that, viewed realistically at the effective date, the property is not suitable for use as a dwelling.

Analysis

There are four main steps in analysing this kind of SDLT question.

First, identify whether the flats are part of linked transactions. If they are acquired as part of one arrangement, from the same seller or connected sellers, or otherwise fall within the linked transaction rules, SDLT is not calculated by looking at each flat in isolation for rate purposes.

Second, consider the condition of the allegedly uninhabitable flat at the effective date of the transaction, usually completion. The legal test is not whether the flat needs works, fails modern expectations, or has defects. The question is whether it was suitable for use as a dwelling at that date. Evidence usually matters here, such as:

• surveyor reports,
• photographs and videos,
• evidence of hazards or structural issues,
• whether essential services were absent or unsafe,
• whether occupation would have posed real safety concerns, and
• whether the defects were substantial rather than cosmetic or routine.

Third, if one flat was truly not suitable for use as a dwelling, there may be an argument that the transaction included non-residential property. In the right case, that can support mixed-use treatment for the linked acquisition. But this does not follow automatically from the buyer simply asserting that a flat was “uninhabitable”. The strength of the argument depends on the evidence and on whether the condition crosses the high legal threshold.

Fourth, assess HMRC risk. SDLT is self-assessed. That means the taxpayer files on the basis they believe is correct, but HMRC can enquire into the return. As Nick pointed out, if there is no strong evidential basis for the mixed-use position, HMRC may argue that the transaction was residential all along. If HMRC succeeds, the likely consequences are:

• additional SDLT becoming due,
• interest on the underpaid amount, and
• potential penalties, depending on the quality of the filing position and disclosure.

In practical terms, the buyer’s proposed argument is not impossible, but it is risky unless the facts are unusually strong. Following Mudan, the courts are unlikely to accept a low threshold. Serious hazards may help, but the evidence must show that the flat was genuinely not suitable for use as a dwelling at completion.

On the figures mentioned in the source material, the suggested tax saving arose because non-residential rates can be significantly lower than higher residential rates in some cases. But the existence of a potential saving does not strengthen the legal argument. The legal analysis must come first.

Outcome

A linked purchase of several flats may be capable of mixed-use SDLT treatment if one flat was genuinely not suitable for use as a dwelling at the effective date of the transaction. However, that is a fact-sensitive and legally demanding argument.

After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold for saying a property was uninhabitable or not suitable for use is relatively high. Many properties in poor condition will still count as residential for SDLT.

If the evidence is weak, HMRC is likely to challenge a mixed-use filing and may seek the additional SDLT, interest, and possibly penalties.

Practical Steps

If you are considering this position, sensible next steps usually include:

• obtain a detailed survey or expert report dealing specifically with the property’s condition at completion;
• gather dated photographs, videos, contractor evidence, and any local authority material relating to hazards or occupation risk;
• check whether the transactions are linked under the Finance Act 2003 rules;
• analyse whether the defects go beyond disrepair and actually make the flat unsuitable for use as a dwelling;
• compare the legal position against recent authorities, especially Mudan;
• consider whether to file on the higher basis first and only pursue a reclaim if the evidence is genuinely strong; and
• ensure the SDLT return and any supporting explanation accurately reflect the facts.

Conclusion

Buying several flats together does not automatically produce mixed-use SDLT treatment just because one flat is in poor condition. The key issue is whether that flat was truly not suitable for use as a dwelling at completion. That is now a high bar, especially after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. A buyer should only rely on this argument where the evidence is strong and carefully documented.

Legal References Used

• Finance Act 2003
• Finance Act 2003, provisions governing residential property, non-residential property, mixed transactions, and linked transactions for SDLT
• 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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