Can an uninhabitable property be treated as non-residential for SDLT?

Introduction

Buyers sometimes ask whether a property in very poor condition can be charged to Stamp Duty Land Tax (SDLT) at non-residential rates rather than residential rates. This usually comes up where the building was said to be uninhabitable at the date of purchase, and the SDLT return must be filed quickly.

The issue matters because the SDLT payable can be significantly different depending on whether the property is treated as residential or non-residential. It also matters because the SDLT return is a self-assessment to HMRC, so the basis used must be accurate and defensible.

The Question

A buyer acquired a dwelling that was said to be in such poor condition at completion that it was not suitable for use as a dwelling. The buyer’s conveyancer was unsure how to reflect this on the SDLT return and discussed whether the transaction should be described as “land” or as “non-residential”. There was also a disagreement about the amount of SDLT due, with two different figures being suggested.

The practical question was:

If a property was uninhabitable when bought, should the SDLT return be filed on the basis that the property is non-residential, and what should the buyer check before signing the return?

Nick’s Explanation

Nick’s central point was that this is not normally a claim to a formal SDLT relief. Instead, it is an argument about the correct classification of the property at the effective date of the transaction.

In substance, his explanation was:

• the SDLT return is made to HMRC, not Companies House;
• the key issue is whether the property should properly be treated as non-residential because it was not suitable for use as a dwelling at completion;
• if that argument is being made, the return should reflect non-residential treatment, not a vague or inaccurate description such as bare land if that is not what was actually bought;
• before signing the return, the buyer should be clear on the exact SDLT figure and the reasoning behind it;
• the buyer should also have evidence of the property’s condition at the date of purchase in case HMRC later asks questions.

Nick also stressed an important practical point: if a return is submitted on the wrong factual basis, it may be harder to defend later. In other words, if the real argument is “not suitable as a dwelling”, the return should be completed consistently with that argument.

The Law

SDLT is charged under the Finance Act 2003. The charge depends in part on whether the subject matter of the transaction is residential property or non-residential property.

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, together with land that forms part of its garden or grounds. Non-residential property is property that does not fall within the residential definition.

For many years, taxpayers relied on PN Bewley Ltd v HMRC to argue that a severely dilapidated dwelling was not “suitable for use as a dwelling” at the effective date of the transaction, so that non-residential rates applied.

However, the position is now materially stricter. 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. That decision means poor condition, disrepair, or the need for renovation will not by themselves be enough. The question is whether, viewed realistically at the effective date, the building had truly ceased to be suitable for use as a dwelling.

That makes the factual evidence especially important.

Analysis

The analysis usually has to be done in four stages.

1. Identify what was actually acquired

   If the buyer acquired a plot with a former dwelling standing on it, that does not automatically make it “land” in the sense of a bare land transaction. If there is a building on the site, the legal and factual question is whether that building was residential property for SDLT purposes at completion.

2. Ask whether the building was suitable for use as a dwelling at the effective date

   This is the core test. The focus is on the condition of the property when the transaction completed, not on what the buyer intended to do later. Planned renovation, redevelopment, or demolition does not itself change the SDLT classification.

3. Apply the current threshold carefully

   After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold for showing that a property was not suitable for use as a dwelling is relatively high. A property may still count as residential even if it has serious defects, requires substantial works, or could not easily be occupied immediately. The condition must be severe enough to take it outside the residential definition.

4. Make sure the SDLT return matches the true argument

   If the position being taken is that the property was not suitable for use as a dwelling, the return should be completed on that basis. The buyer should not sign a return using a description that is factually misleading or legally confused.

On the figures, the buyer should not guess. The correct non-residential SDLT amount should be checked carefully using the correct rates for the effective date of the transaction and the actual chargeable consideration. If two different figures appear, the conveyancer should provide a full calculation showing how each number was reached.

Outcome

If a property was genuinely not suitable for use as a dwelling at the date of completion, it may be capable of treatment as non-residential for SDLT purposes. But that conclusion should not be reached casually.

The safer practical view is:

• do not describe the transaction as “land” unless that is truly what was acquired and accurately reflects the legal position;
• if the argument is based on unsuitability for use as a dwelling, the return should be prepared consistently with that argument;
• because of Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the standard for proving non-residential treatment on condition grounds is now relatively demanding;
• the buyer should confirm the exact SDLT amount before the return is filed and signed.

Practical Steps

If you are considering non-residential SDLT treatment because of condition, take these steps:

1. Ask for a full SDLT calculation showing the chargeable consideration, rate bands used, and final tax figure.

2. Check how the property is being described on the SDLT return and whether that matches the real legal argument.

3. Gather evidence of condition at the effective date, such as dated photographs, survey reports, contractor reports, mortgage valuation comments, environmental reports, utility disconnection evidence, and completion-day correspondence.

4. Focus on the actual condition at completion, not later works or later occupation.

5. Review the case law carefully, especially the effect of Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, before assuming that major disrepair is enough.

6. Do not sign the SDLT return until you understand and are satisfied with the factual basis being stated to HMRC.

Conclusion

An uninhabitable property is not automatically non-residential for SDLT. The question is whether, at completion, it was truly not suitable for use as a dwelling. That argument must be supported by strong evidence, and the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Before filing, the buyer should make sure both the legal basis and the tax calculation are correct.

Legal References Used

• Finance Act 2003
• PN Bewley Ltd v HMRC
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799
• Homes (Fitness for Human Habitation) Act 2018
• HMRC SDLT1 completion guidance

This page was last updated on 22 March 2026.

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