Do you need to file an SDLT return if a property was uninhabitable at completion?

Introduction

Buyers sometimes assume that no Stamp Duty Land Tax (SDLT) return is needed if a property was in very poor condition when it was bought. That can cause problems later, especially when HM Land Registry asks for an SDLT5 certificate or for confirmation from HMRC explaining why no return was required.

The key point is that a property being in disrepair does not automatically mean SDLT is not due, and it does not automatically mean no return is needed. In many cases, if the buyer wants to argue that the building was not suitable for use as a dwelling at the effective date of the transaction, the practical route is still to file an SDLT return and self-assess the transaction on a non-residential basis.

This issue has become harder for taxpayers after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, because the courts have confirmed that the threshold for showing a dwelling was not suitable for use is now relatively high.

The Question

A buyer purchased a residential-looking property through a company for £334,250. The buyer believed the building was in such poor structural condition at completion that it was not suitable for use as a dwelling. No SDLT appears to have been filed at the time of completion. HM Land Registry has since asked for either an SDLT5 certificate or written confirmation from HMRC explaining why the transaction was not reportable.

The buyer wants to know what should now be done, whether a non-residential SDLT return should still be filed, and whether late filing penalties and interest are likely to apply.

Nick’s Explanation

Nick’s central point was that the question is not whether the property looked bad, but whether, applying the case law, it was truly “not suitable for use as a dwelling” at the effective date of the transaction.

He explained that this is “not a clear-cut test” and that HMRC often argue that properties remain dwellings even where they are in very poor condition. In other words, this is usually an arguable position rather than a certain one.

On the facts given, Nick said that if the buyer wishes to rely on the property being unsuitable for use as a dwelling, the SDLT return should be filed on a non-residential basis. Using the stated consideration of £334,250, he calculated the non-residential SDLT as:

• 0% on the first £150,000 = £0
• 2% on the next £100,000 = £2,000
• 5% on the remaining £84,250 = £4,212.50

Total: £6,212.50

He also pointed out the risk if HMRC disagrees. If HMRC were to say the property was still residential, then because the purchase was by a company, the higher residential rates would apply. On the figures provided, that would be:

• 5% on the first £125,000 = £6,250
• 7% on the next £125,000 = £8,750
• 10% on the remaining £84,250 = £8,425

Total: £23,425

Nick’s practical advice was that the buyer should instruct the conveyancer to file the SDLT return immediately as non-residential if that is the buyer’s chosen self-assessment, include an explanation of the condition issues, and pay the tax to stop further interest running. He also noted that HMRC would then have nine months from filing to open an enquiry.

The Law

SDLT is charged under Finance Act 2003. The amount of tax depends on the nature of the subject matter acquired and the rates that apply to it.

For SDLT purposes, an important distinction exists between:

• residential property, and
• property that is not residential property.

A building can fail to count as residential property if, at the effective date of the transaction, it is not suitable for use as a dwelling. If that is correct, the transaction may be taxed at non-residential rates instead.

However, the legal test is strict. The modern leading authority is Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That Court of Appeal decision confirms that the condition threshold in uninhabitable or unsuitable-for-use cases is relatively high. Serious disrepair, deferred maintenance, or the need for renovation will not by themselves be enough if the building still retains the character of a dwelling and could still realistically be used as one.

On procedure, Finance Act 2003, Schedule 10 provides the filing rules for SDLT returns. In broad terms:

• the return must be filed within 14 days of the effective date of the transaction: Schedule 10, paragraph 3(3);
• late filing can trigger fixed penalties under Schedule 10, paragraph 25;
• if the return is filed more than 12 months late, tax-geared penalties may also arise under Schedule 10, paragraph 25A.

Interest on unpaid SDLT runs under the statutory machinery applied to SDLT, including section 87(1) TMA 1970 as applied by Finance Act 2003.

In practice, HM Land Registry usually expects either:

• an SDLT5 certificate generated after a return is filed, or
• a proper basis showing why no return was required.

Where there is uncertainty over classification, filing a return is often the cleaner route.

Analysis

Step one is to identify the real issue. The issue is not whether the property was attractive, mortgageable, or in need of major repair. The issue is whether, on the completion date, it was legally “suitable for use as a dwelling”.

Step two is to apply the current case law carefully. After Mudan, the bar is fairly high. Structural cracking, subsidence, missing facilities, damp, unsafe services, or extensive works may all be relevant evidence, but the question is whether the defects were so severe that the building had ceased to be suitable for use as a dwelling at all. Many taxpayers overestimate how easy it is to meet this test.

Step three is to decide how to self-assess the transaction. If the buyer genuinely concludes, based on the evidence, that the building was not suitable for use as a dwelling, the transaction can be filed on a non-residential basis. That does not mean the transaction is outside SDLT altogether. It means SDLT is still payable, but at non-residential rates.

Step four is to deal with the filing failure. If no return was submitted at completion, that should be corrected promptly. Waiting creates three separate problems:

• continuing interest on unpaid tax;
• late filing penalties;
• difficulty satisfying HM Land Registry.

Step five is to understand the enquiry risk. Once the return is filed, HMRC generally have nine months from the filing date to open an enquiry into the self-assessment. If HMRC challenges the non-residential treatment, the buyer may have to defend the position using evidence such as structural reports, photographs, survey findings, contractor assessments, and the legal authorities.

Step six is to compare the financial outcomes. On the figures given:

• non-residential SDLT would be £6,212.50;
• higher-rate residential SDLT for a company purchaser would be £23,425.

That difference explains why these cases are often disputed. It also explains why the evidence must be strong.

Step seven is to address the Land Registry point. Land Registry is not there to decide disputed SDLT classification questions in the abstract. If no SDLT5 exists because no return was filed, the usual practical answer is to file the SDLT return now so that the certificate can be produced.

Outcome

If a buyer wants to rely on the property having been not suitable for use as a dwelling at completion, the practical course is usually to file the SDLT return on a non-residential basis rather than treating the matter as wholly non-reportable.

On the facts described, the likely practical conclusion is:

• an SDLT return should be filed now;
• the return should state the buyer’s chosen self-assessment, here non-residential if that position is genuinely maintained;
• the non-residential SDLT should be paid now to stop further interest accruing;
• late filing penalties and interest are likely if the filing deadline has already passed;
• HMRC may later enquire into whether the property was in fact still residential.

Readers should also keep firmly in mind that, after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, proving that a dwelling was not suitable for use is more difficult than many older online discussions suggest.

Practical Steps

1. Check whether any SDLT return was ever filed. If there is no SDLT5, that is often a sign that no return was submitted, although it should be confirmed properly.
2. Gather the evidence that existed at completion, not just after later works began. This may include structural engineer reports, survey reports, photographs, contractor opinions, insurance information, and correspondence showing the actual condition on the effective date.
3. Review whether the defects truly meet the high legal threshold for “not suitable for use as a dwelling”. Focus on functionality and habitability at completion, not just cost of repair.
4. If that position is still maintained, instruct the conveyancer to file the SDLT return immediately on a non-residential basis.
5. Ask for a white-space explanation in the return setting out the key facts supporting the treatment adopted.
6. Pay the SDLT shown as due as soon as possible to limit further interest.
7. Use the resulting SDLT5 certificate to answer HM Land Registry’s requisition.
8. Be prepared for an HMRC enquiry within nine months of filing.
9. If the filing is close to or beyond 12 months late, act urgently because the penalty position becomes more serious.

Conclusion

A property in very poor condition is not automatically outside SDLT and is not automatically non-reportable. If the buyer’s case is that the building was not suitable for use as a dwelling at completion, the usual route is to file an SDLT return on a non-residential basis and support that self-assessment with evidence. Because the legal threshold is now relatively high after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, buyers should assess the facts carefully and file promptly if no return has yet been made.

Legal References Used

• Finance Act 2003
• Finance Act 2003, Schedule 10, paragraph 3(3)
• Finance Act 2003, Schedule 10, paragraph 25
• Finance Act 2003, Schedule 10, paragraph 25A
• Taxes Management Act 1970, section 87(1) as applied for SDLT purposes
• 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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