Can you reclaim SDLT if a property was structurally unsafe and not suitable for use as a dwelling?

Introduction

Many buyers ask whether they can reclaim Stamp Duty Land Tax (SDLT) where a property was in such poor condition at completion that it should not have been treated as residential property. This question often comes up where the building was empty, needed major works, or had serious structural defects.

The issue matters because SDLT rates for residential property are usually higher than the rates that apply to non-residential or mixed-use property. If a building was not “suitable for use as a dwelling” on the effective date of the transaction, the SDLT treatment may have been wrong.

The difficulty is that the legal test is now stricter than many people assume. 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 purchased a high-value property and later obtained a structural report indicating serious defects. The report suggested major structural instability, including defects affecting the integrity of the building and an unsafe extension or conservatory requiring demolition and rebuilding. The buyer wanted to know whether the property could be treated as not suitable for use as a dwelling for SDLT purposes, and if so, whether the SDLT return could still be amended or a repayment claim made.

Nick’s Explanation

Nick’s view was that the case turned not on ordinary habitability in the everyday sense, but on whether the building had lost its identity as a dwelling at the relevant date.

In anonymised form, his reasoning was:

“The key test is no longer whether the property was simply in poor condition. The real question is whether it had lost its identity as a dwelling, usually because of serious structural or safety issues preventing lawful residential use.”

He considered that there may be a reasonable argument where the evidence shows serious structural defects, such as foundation failure, major corrosion in load-bearing elements, unsafe additions requiring demolition, and widespread water ingress or decay. In that kind of case, the argument is that the property did not merely need renovation; rather, it lacked the essential characteristics of a dwelling at completion.

He also explained the procedural point. If the SDLT return is still within the amendment window, an amendment can be made without having to provide a full narrative case at the outset. If that window has passed, a claim may still be possible under overpayment relief, but HMRC is more likely to scrutinise it closely.

The Law

The starting point is section 116 of the Finance Act 2003. For SDLT purposes, “residential property” includes a building that is used or suitable for use as a dwelling.

If a building is not suitable for use as a dwelling on the effective date of the transaction, it may fall outside residential treatment. Depending on the facts, that can mean non-residential or mixed-use SDLT rates apply instead.

The procedural rules for correcting an SDLT return are found in Schedule 10 to the Finance Act 2003:

• Schedule 10, paragraph 6 allows amendment of an SDLT return within 12 months of the filing date.
• Schedule 10, paragraph 34 provides a route to claim repayment of overpaid SDLT in certain cases where too much tax was paid.

HMRC may enquire into an amended return or claim. If HMRC disagrees, it may issue a closure notice, after which the taxpayer can seek review and, if necessary, appeal to the First-tier Tribunal.

The main case law in this area includes PN Bewley Ltd v HMRC and, more recently and more importantly, Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

After Mudan, the threshold is materially higher than some earlier claims assumed. A property does not cease to be residential merely because it needs extensive repair, modernisation, rewiring, replumbing, or general refurbishment. The Court of Appeal made clear that the focus is on whether there are fundamental defects or dangers of a kind that mean the building is no longer suitable for use as a dwelling.

Analysis

The analysis usually works in five steps.

First, identify the legal test on the effective date of the transaction. The question is not whether the buyer intended to renovate, nor whether the property looked unattractive, nor whether it was inconvenient to live in. The question is whether, at completion, the building was suitable for use as a dwelling within section 116 FA 2003.

Second, separate ordinary disrepair from fundamental structural or safety failure. Following Mudan, ordinary renovation issues are not enough. A claim is stronger where the evidence shows matters such as:

• foundation failure or serious subsidence requiring underpinning;
• risk of collapse or serious instability;
• dangerous structural movement;
• unsafe load-bearing elements;
• major hazards such as severe asbestos contamination or comparable safety risks;
• parts of the building requiring demolition and reconstruction because they are unsafe.

Third, consider whether the defects meant the building had lost its identity as a dwelling. That is now the central point. If the property was still recognisably a house or flat that merely required substantial works, HMRC is likely to say it remained residential. If, however, the defects were so severe that lawful and safe residential occupation was not realistically possible, the taxpayer may have a proper argument.

Fourth, review the evidence. Strong evidence may include:

• a structural engineer’s report;
• survey findings describing structural instability;
• photographs taken close to completion;
• evidence of long-term vacancy, where linked to condition rather than choice;
• demolition or emergency works recommendations;
• documents showing the property could not safely be occupied.

Fifth, consider timing. If the return is still within the 12-month amendment period under Schedule 10 paragraph 6, that is usually the simplest route. If not, the buyer may need to rely on Schedule 10 paragraph 34 overpayment relief. That route can still work, but HMRC often expects a clear factual and legal basis.

On the facts described here, the strongest points are the alleged structural hazards: foundation failure, severe corrosion in structural elements, an unsafe extension requiring demolition and rebuilding, and widespread deterioration affecting safety. Those matters go beyond cosmetic disrepair. If proven, they may support an argument that the building was not suitable for use as a dwelling at the effective date.

That said, the bar is high. The fact that a survey says “not fit for habitation” does not automatically decide the SDLT issue. SDLT uses a specific statutory test. After Mudan, the court is looking for fundamental danger or loss of dwelling identity, not simply a building that needs major work.

Outcome

A buyer in this position may have a viable SDLT reclaim argument, but only if the evidence shows more than ordinary poor condition or renovation need. The best cases are those involving serious structural or safety defects that meant the property had effectively ceased to be suitable for use as a dwelling at completion.

If the defects are genuinely fundamental, an amendment or repayment claim may succeed. If the property was simply dilapidated but still basically a house capable of being restored through works, HMRC is likely to resist the claim, especially after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Practical Steps

If you are assessing a possible claim, the practical steps are:

1. Check the transaction date and SDLT filing date to see whether the 12-month amendment window under Schedule 10 paragraph 6 is still open.
2. Obtain the core transaction documents, including the TR1, SDLT5, signed contract, and completion statement.
3. Gather condition evidence from the time of purchase, especially structural reports, surveys, photographs, and any contractor or engineer opinions.
4. Focus on evidence of structural danger or loss of dwelling identity, not just dated condition or refurbishment need.
5. Review whether any long-term vacancy was caused by the condition of the building rather than personal choice.
6. Prepare for the possibility of an HMRC enquiry if a repayment is made.
7. If HMRC challenges the claim, consider internal review and then appeal to the First-tier Tribunal if appropriate.

Where the claim depends on severe structural condition, the quality and timing of the evidence are often decisive.

Conclusion

An SDLT reclaim based on a property being uninhabitable is still possible, but the legal threshold is now demanding. The key question is whether the building had lost its identity as a dwelling because of fundamental structural or safety defects. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, ordinary disrepair and even major renovation needs will usually not be enough on their own.

Legal References Used

• Finance Act 2003, section 116
• Finance Act 2003, Schedule 10, paragraph 6
• Finance Act 2003, Schedule 10, paragraph 34
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799
• PN Bewley Ltd v HMRC

This page was last updated on 22 March 2026.

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