SDLT on second homes and uninhabitable dwellings
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Can you reclaim SDLT on a second property bought in very poor condition?
Introduction
Many buyers ask whether they can reclaim Stamp Duty Land Tax (SDLT) if they bought a residential property that was in extremely poor condition at completion. This issue often comes up where the property was empty, sold at auction, needed major structural work, or could not be lived in without extensive repairs.
The key legal question is whether the property was “suitable for use as a dwelling” on the effective date of the transaction. If it was not, different SDLT treatment may be available. However, the threshold for proving that a dwelling was not suitable for use is now relatively high, especially following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
The Question
A buyer purchased an additional residential property in late 2024 and paid SDLT at the higher rates for an extra dwelling. The property was said to be in very poor condition. The reported issues included:
- long-term neglect and vacancy;
- sale by auction to cash buyers only;
- no functioning kitchen;
- serious problems with the kitchen floor requiring excavation and a new sub-base;
- roof instability and loss of structural integrity in parts of the roof timbers;
- historic infestation damage;
- water supply issues requiring floors to be opened up for replacement pipework;
- damp caused by roof leaks and damaged drains;
- overgrown external areas affecting the building; and
- a collapsed ceiling caused by water ingress.
The buyer wanted to know whether these facts could support an SDLT reclaim on the basis that the property was not suitable for use as a dwelling.
Nick’s Explanation
Nick’s central point was that the timing of the purchase matters greatly.
He explained, in substance, that if the property had been bought before 2 October 2024, HMRC had in practice been dealing with some claims on a broader basis, where the property was too dangerous to live in or needed more than ordinary repair or renovation. But for purchases on or after that date, HMRC’s approach became much stricter.
Nick summarised the current position as follows: unless the property has fundamental defects that cannot be repaired, HMRC is likely to regard it as still being suitable for use as a dwelling.
He also noted that, on the facts described, the property might once have looked like a strong example of an uninhabitable dwelling claim under the earlier, more generous understanding. But under the present and more restrictive approach, the case would likely need to wait on the outcome of the developing case law. That position has now been clarified by Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, which confirms that the threshold is high.
The Law
SDLT is charged under the Finance Act 2003. Whether property is taxed at residential or non-residential rates depends on the nature of the subject matter acquired at the effective date of the transaction.
For these purposes, a building counts as residential property if it is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use. The important statutory wording appears in section 116 of the Finance Act 2003.
In practice, disputes arise where a buyer acquires a run-down house or flat and argues that, because of its condition, it was not suitable for use as a dwelling at completion. If that argument succeeds, the buyer may contend that the property should not have been treated as residential in the ordinary way.
The courts have made clear that this is an objective test. The question is not whether the buyer intended to renovate, whether mortgage finance was unavailable, or whether the property was unattractive to ordinary occupiers. The question is whether, viewed realistically at the effective date, the building was suitable for use as a dwelling.
The modern approach is stricter than many earlier claimants expected. 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.
Analysis
The facts described show a property in severe disrepair. That certainly raises the right question, but it does not automatically produce a refund.
Step by step, the analysis usually works like this.
Identify the relevant date
The condition of the property must be assessed at the effective date of the transaction, usually completion. Later works, however extensive, do not by themselves prove the property was unsuitable on that date.
Ask whether the building remained a dwelling in substance
A neglected house can still be a dwelling even if it is empty, dirty, damp, unsafe in places, or in need of major refurbishment. The absence of modern convenience is not always enough.
Separate disrepair from fundamental failure
Problems such as a missing kitchen, defective plumbing, roof leaks, rotten timbers, damaged drains, infestations, or collapsed ceilings may indicate serious deterioration. But the legal issue is whether these matters mean the building was no longer suitable for use as a dwelling at all, rather than simply requiring substantial repair.
Consider whether the defects were repairable
This is where many claims now fail. If the building could be restored by repair, replacement, or renovation, HMRC is likely to say it remained a dwelling, even if the works were expensive and extensive. The present threshold is aimed at more extreme cases, where there are fundamental defects that cannot realistically be repaired.
Ignore factors that are not legally decisive
An auction listing stating “cash buyers only”, a long period of vacancy, probate history, or local authority involvement may support the overall picture of disrepair, but they do not decide the SDLT issue on their own.
Applying that approach here, the property appears to have had very serious defects. Before the tightening of HMRC’s approach, these facts might have supported a stronger reclaim argument. But after the current shift in approach, and especially in light of Mudan, the fact that the defects were capable of being put right by major works may count heavily against the claim.
That does not mean the condition was minor. It means the legal threshold is now much harder to satisfy. A building can be in dreadful condition and still be treated as suitable for use as a dwelling for SDLT purposes.
Outcome
The practical conclusion is that a buyer who completed in late 2024 on a second property in very poor condition is unlikely to succeed with an SDLT reclaim unless the facts show something more than severe disrepair and repairable defects.
Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold in “not suitable for use as a dwelling” cases is relatively high. Major renovation needs, structural deterioration, missing facilities, damp, drainage problems, and even significant safety concerns may still fall short if the property remained, in essence, a repairable dwelling.
Practical Steps
If you are assessing a possible SDLT reclaim in similar circumstances, the sensible next steps are:
- obtain the completion date and SDLT filing position;
- gather contemporaneous evidence of the property’s condition at completion, including survey reports, auction particulars, photographs, builder reports and local authority records;
- identify precisely which defects existed at that date, rather than what was later discovered during works;
- analyse whether the defects were repairable, or whether they were so fundamental that the building could not realistically be treated as a dwelling;
- review the position against section 116 Finance Act 2003 and the current case law, especially Mudan;
- be cautious about relying on older commentary or older claim outcomes, because the legal landscape has become less favourable to taxpayers; and
- take specific professional advice before filing or amending a reclaim, particularly where higher rates for additional dwellings were also paid.
Conclusion
A property can be neglected, unsafe and in need of extensive works, yet still count as suitable for use as a dwelling for SDLT purposes. For purchases completed in late 2024 and after, the legal test is demanding. In uninhabitable property cases, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
Legal References Used
- Finance Act 2003, section 116
- 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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