Can you claim SDLT back if a property was not suitable for use as a dwelling?

Introduction

Many buyers ask whether Stamp Duty Land Tax (SDLT) can be reduced or reclaimed where a residential property was in very poor condition when bought. A common argument is that the building was not “suitable for use as a dwelling” at the effective date of the transaction, so it should not be treated as residential property for SDLT purposes.

This issue matters because the SDLT treatment of a property depends heavily on whether it counts as residential property at the time of purchase. If it does not, different rates may apply. But this is now a difficult area. The courts have set a relatively high threshold for proving that a property was not suitable for use as a dwelling, especially following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A buyer purchased a property at auction without first inspecting it in person. After completion, the buyer discovered that the property was in serious disrepair. It reportedly lacked basic facilities such as a functioning kitchen and bathroom, had no live gas or electricity supply, had been empty for a long period, and required major renovation works.

The buyer made an SDLT refund claim on the basis that the property was not suitable for use as a dwelling at the date of purchase. HMRC rejected the claim and warned that pursuing the point further could expose the buyer to a penalty if the return was considered careless. The question is whether, in circumstances like these, a further SDLT claim can still sensibly be made.

Nick’s Explanation

Nick’s central point was that HMRC’s rejection was based on a substantive legal disagreement, not a minor procedural problem. In other words, HMRC were saying that, on the facts presented, the property still counted as suitable for use as a dwelling for SDLT purposes.

He explained that HMRC relied on Mudan v HMRC and had also warned about the risk of a careless inaccuracy penalty if the buyer continued with the claim without proper care.

Nick’s view was that any further submission would need to be carefully reasoned and supported by evidence. In anonymised form, his reasoning can be summarised as follows:

• the property was said to be in extensive disrepair and had allegedly not been lived in for a significant period;
• the buyer believed the facts were more serious than the facts considered in Mudan;
• the condition of the property at the date of purchase would need to be evidenced by photographs, utility information, reports and transaction documents;
• if a claim was pursued, it had to be framed carefully so that it was not careless.

That approach reflects a real point of tax practice: even where a taxpayer has arguments, those arguments must be legally accurate, properly evidenced and realistically assessed against current case law.

The Law

SDLT is charged under the Finance Act 2003. The key issue in cases of this kind is whether the subject matter of the transaction was “residential property” at the effective date of the transaction.

Section 116 of the Finance Act 2003 sets out the meaning of residential property. Broadly, a building is residential property if it is used as a dwelling or is suitable for use as a dwelling, or is in the process of being constructed or adapted for such use.

That means the test is not limited to whether someone was actually living there on completion. A property may still be residential even if it is vacant, run down, or in need of repair. The question is whether, viewed objectively at the relevant date, it was suitable for use as a dwelling.

The courts have considered this question in a number of cases. The most important authority now is Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Following that decision, the threshold for showing that a property was not suitable for use as a dwelling is relatively high. Serious disrepair alone is often not enough.

The Court of Appeal’s decision means that many features taxpayers often rely on do not automatically take a property outside the residential rules. Missing fittings, poor decorative condition, an outdated or unusable kitchen or bathroom, lack of utility connection, or the need for substantial refurbishment may still fall short if the building remains recognisable as a dwelling and is capable of being made habitable without fundamental reconstruction.

Where HMRC consider that a taxpayer has made an inaccurate claim without taking reasonable care, penalties can arise under Schedule 24 to the Finance Act 2007.

Analysis

The starting point is the date of purchase. SDLT classification is judged at that date, not by reference to what works were later carried out or how expensive the renovation became.

In a case like this, the buyer may point to the following:

• no functioning kitchen;
• no functioning bathroom;
• no gas or electricity connected;
• long-term vacancy;
• poor EPC rating or evidence that the property could not lawfully be let;
• major repair works required.

Those facts may help show serious disrepair, but they do not by themselves decide the SDLT issue. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition thresholds are now relatively high in an uninhabitable or not suitable for use case.

The practical question is whether the property had ceased, in substance, to be suitable for use as a dwelling at all. That usually requires more than showing that it was unpleasant, inconvenient, uneconomic to occupy, or not immediately ready for normal modern living.

For example:

• If the building still had the basic character of a house or flat and could be restored by repair and replacement works, HMRC are likely to say it remained residential.
• If the defects were so severe that the building could not realistically function as a dwelling without major structural rebuilding or reinstatement, the argument becomes stronger.
• Evidence of long-term dereliction can help, but vacancy alone is not enough.
• An EPC rating or letting restriction may be relevant background, but it is not the legal test for SDLT.

That is why evidence matters. Photographs taken at completion are more persuasive than later renovation photos. Survey reports, utility disconnection records, engineer reports, auction particulars, and contemporaneous correspondence may all assist. Even so, strong evidence of disrepair does not guarantee success if the legal threshold is not met.

There is also a separate penalty point. Once HMRC have already rejected the argument and explained their position, a taxpayer who repeats the claim without properly addressing the law and evidence may face an allegation that the return was careless. That does not mean a further claim is impossible, but it does mean the reasoning must be careful, accurate and complete.

Outcome

The practical conclusion is that claims based on a property being “not suitable for use as a dwelling” are now significantly harder to win than many buyers expect. A property in poor condition, even one lacking a usable kitchen, bathroom, or live utility supply, may still be treated as residential property for SDLT.

In a case like this, a further claim is only likely to be worth pursuing if there is strong contemporaneous evidence that the condition at completion crossed the now high threshold confirmed by Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Practical Steps

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

1. Identify the exact effective date of the transaction and focus only on the property’s condition at that date.
2. Gather contemporaneous evidence, including photographs, videos, survey reports, auction documents, utility records, completion paperwork and any engineer or contractor evidence.
3. Separate evidence of disrepair from evidence of true unsuitability for use as a dwelling. The second is the harder point.
4. Check whether the property remained structurally a dwelling, even if it needed extensive works.
5. Review the case against Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 and the wording of section 116 Finance Act 2003.
6. Take care over the wording of any amendment, reclaim or further submission to HMRC so that the legal basis is correctly stated.
7. Consider the penalty risk before filing anything further, especially if HMRC have already warned that they regard the point as unsustainable on the known facts.

Conclusion

A buyer can sometimes argue that a property was not suitable for use as a dwelling for SDLT purposes, but the bar is now high. Serious disrepair is not enough on its own. The question is whether the property had truly ceased to be suitable for use as a dwelling at the purchase date, and that must be shown with strong evidence and careful legal reasoning.

Legal References Used

• Finance Act 2003, section 116
• Schedule 24 to the Finance Act 2007
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799
• Aldford House Freehold Ltd v Grosvenor (Mayfair) Estate [2019] EWCA Civ 1848

This page was last updated on 22 March 2026.

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