Can you reclaim SDLT if a property was uninhabitable at purchase?

Introduction

Many buyers ask whether a property in very poor condition can be treated as non-residential for Stamp Duty Land Tax (SDLT) purposes. The reason is simple: if a building was not “suitable for use as a dwelling” on the effective date of the transaction, the residential SDLT rules may not apply in the usual way.

This issue has been heavily litigated. Recent case law has made clear that the legal threshold is now relatively high. A property does not become non-residential just because it needs major repairs, modernisation, rewiring, plumbing work or even substantial refurbishment. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, only more extreme cases are likely to fall outside the definition of a dwelling.

The Question

A buyer had been considering or pursuing an SDLT reclaim on the basis that the property bought was allegedly uninhabitable and therefore should have been taxed as non-residential rather than residential. The concern was whether recent tribunal and court decisions had changed the position, whether an appeal might affect similar claims, and whether a claim should still be lodged before the statutory time limit expired.

Nick’s Explanation

Nick’s explanation, put into general terms, was that the reclaim argument depends on the distinction between residential and non-residential SDLT treatment. He highlighted that earlier decisions had focused attention on the phrase “suitable for use as a dwelling”, but also warned that HMRC was likely to resist claims based only on poor condition.

In substance, his explanation was:

• if a building truly cannot be used as a dwelling and must effectively be demolished or cannot realistically be reused as a home, that may support non-residential treatment;
• however, where a property remains structurally recognisable as a dwelling and retains the basic character of a home, disrepair alone will usually not be enough;
• buyers close to the four-year amendment deadline may need to consider filing in time so that the position is preserved while the law develops.

That summary broadly reflected the litigation landscape at the time. The position has since become clearer, and stricter, after the Court of Appeal’s decision in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Law

SDLT is charged under the Finance Act 2003. Whether property is residential or non-residential matters because different rate structures apply.

The key statutory provisions are in section 116 Finance Act 2003. Broadly:

• “residential property” includes a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use;
• if property is not residential property, it may fall to be treated as non-residential or mixed property depending on the facts.

The central dispute in many “uninhabitable property” cases has been the meaning of “suitable for use as a dwelling”.

Earlier cases, including Fiander and Brower v HMRC [2021] UKUT 156 (TCC), considered this wording and rejected overly narrow or purely day-to-day habitability tests. The courts have generally looked at the property’s objective character at the effective date of the transaction.

The leading modern authority is now 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, lack of modern amenities, or the need for substantial works will not automatically prevent a building from being residential property for SDLT.

Analysis

To work out whether an SDLT reclaim is realistic, the analysis usually runs as follows.

First, identify the property’s condition on the effective date of the transaction, usually completion. The legal test is applied at that date, not after later stripping-out or redevelopment.

Second, ask whether the building still had the objective character of a dwelling. Relevant points may include:

• whether it was built as a home and remained recognisable as one;
• whether it had the essential physical characteristics of a dwelling;
• whether it had recently been occupied or was capable of being occupied after repair;
• whether the defects were repair issues, even if serious, rather than the absence of the essential nature of a dwelling.

Third, distinguish between disrepair and true unsuitability. A property may be unpleasant, unsafe, outdated or expensive to repair, yet still be “suitable for use as a dwelling” in the statutory sense. The courts have moved away from a broad “uninhabitable equals non-residential” approach.

Fourth, consider whether the case is one of the rare extreme examples. The strongest cases tend to involve buildings that cannot realistically function as dwellings at all, or where demolition rather than repair is the genuine position. Even then, the evidence must be strong and contemporaneous.

After Mudan, the practical position is that the condition threshold is now relatively high. A buyer cannot safely assume that lack of heating, defective electrics, plumbing problems, water damage, roof defects or the need for major renovation will be enough. Those facts may show a poor-quality dwelling, but not necessarily a non-dwelling.

This is also why HMRC has challenged many claims in this area. Where a reclaim is made on weak facts, there is a risk not only of refusal but also of enquiry into any repayment already made.

Outcome

The practical conclusion is that most properties bought in disrepair will still be treated as residential for SDLT purposes. A reclaim is now likely to succeed only in a narrow class of cases where the property was genuinely not suitable for use as a dwelling at the effective date.

Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the bar is high. If the property was still fundamentally a house or flat needing repair, refurbishment or even major works, residential SDLT treatment will usually remain correct.

Practical Steps

If you are assessing a possible SDLT reclaim, the sensible next steps are:

• review the completion date and check whether you are still within the statutory time limit for amendment or claim;
• gather contemporaneous evidence from the purchase date, such as surveys, valuation reports, photographs, mortgage records, insurance documents and contractor opinions;
• focus on the condition at completion, not on later works or later decisions to redevelop;
• compare the facts carefully against the reasoning in Fiander and Brower v HMRC and Amarjeet and Tajinder Mudan v The Commissioners for HMRC;
• be cautious about claims based only on disrepair, lack of modernisation or the cost of repairs;
• if you are close to the deadline, consider whether a protective filing is necessary, but only on a properly evidenced basis.

Conclusion

A property is not treated as non-residential for SDLT just because it was in poor condition when bought. The current legal position is stricter than many buyers expect. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, only genuinely exceptional properties are likely to fall outside the meaning of a dwelling.

Legal References Used

• Finance Act 2003, section 116
• Fiander and Brower v HMRC [2021] UKUT 156 (TCC)
• 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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