Are HMRC still paying SDLT refund claims for uninhabitable property?

Introduction

People often ask whether HMRC is still paying Stamp Duty Land Tax (SDLT) refund claims where a property was said to be uninhabitable at the date of purchase. That question usually comes up after a claim has stalled, an adviser has stopped acting, or the buyer has heard that HMRC is challenging these cases more closely.

The short answer is that HMRC does still pay valid claims. But payment depends on the legal merits and on the claim being made correctly. It is not enough that a property needed work or had defects. The legal test for a property to count as non-residential because it was not suitable for use as a dwelling is now demanding, and the threshold is relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A property investor asked whether HMRC was still paying SDLT reclaim cases after another adviser had withdrawn from acting. The investor had several properties in mind and wanted to know whether common problems such as lead pipes, lack of gas or electricity, structural issues, mould, damp and no heating would be enough to support a reclaim.

Nick’s Explanation

Nick’s core point was that HMRC does continue to pay reclaim cases where the claim is procedurally correct and legally sound. In anonymised form, his explanation was:

“HMRC are definitely continuing to pay reclaim cases. As long as the case is procedurally correct, they will pay.”

He also noted that he had recently seen several matters where earlier submissions had stalled and fresh review was needed to work out whether the issue was with HMRC, with the way the claim had been presented, or with the underlying merits.

That is an important distinction. A delayed or unsuccessful claim does not necessarily mean HMRC has stopped paying these claims altogether. It may mean:

• the legal test was not actually met;
• the evidence was too weak;
• the claim was framed incorrectly;
• the buyer relied on defects that do not make a property unsuitable for use as a dwelling in the SDLT sense; or
• the adviser withdrew for reasons unrelated to HMRC’s willingness to pay valid claims.

The Law

SDLT is charged under the Finance Act 2003. Different rates can apply depending on whether the subject matter is residential property, non-residential property, or mixed property.

For these cases, the key issue is whether the property was “residential property” at the effective date of the transaction. Broadly, a building used or suitable for use as a dwelling will usually be residential property. If a building is not suitable for use as a dwelling at the relevant date, the taxpayer may argue that the purchase should not have been taxed at residential rates.

The question is determined at the effective date of the transaction, usually completion. The test is not whether the property was attractive, modern, mortgageable, or in good repair. The question is whether, viewed realistically and objectively, it was suitable for use as a dwelling at that time.

Case law has made clear that this is a fact-sensitive exercise. However, the courts have repeatedly rejected the idea that ordinary disrepair, missing amenities, or the need for renovation automatically makes a property non-residential.

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

To assess whether HMRC is likely to pay a claim, it helps to work through the issue in stages.

First, identify the exact basis of the reclaim. If the argument is that the property was not suitable for use as a dwelling, the taxpayer must show more than inconvenience, poor condition, or the need for refurbishment.

Second, focus on the condition at completion. Later works, later surveys, or later deterioration are much less important unless they prove the true condition on the purchase date.

Third, test each defect against the legal threshold.

• Lead pipes alone will rarely be enough. Many older properties have outdated plumbing or materials that a buyer may wish to replace, but that does not usually stop the building being a dwelling.
• No gas or electricity is not automatically enough either. Much will depend on whether services were disconnected temporarily, whether the property could still realistically be occupied, and how serious the overall condition was.
• No heating may support the argument in some cases, but on its own it is often not decisive, especially if the property otherwise remains capable of occupation.
• Structural issues, mould and damp may be more significant, but the question is one of severity. Minor or moderate defects are not enough. The defects must be serious enough that the property was not suitable for use as a dwelling at all.

Fourth, consider the overall picture rather than isolated defects. A combination of serious problems may succeed where one issue alone would not. But the combined effect still has to cross a high threshold.

Fifth, look at the evidence. Strong claims usually depend on contemporaneous material such as:

• survey reports close to completion;
• photographs showing the actual condition at the relevant date;
• builder or engineer reports;
• utility records confirming disconnection or absence of supply;
• local authority or environmental health material where relevant; and
• completion statements and transaction documents showing the property was bought in that state.

Sixth, make sure the procedure is right. Even a good substantive case can fail if the amendment, overpayment relief claim, or supporting explanation is not handled properly.

Applying those points to the kinds of defects described in the query:

• Properties with lead pipes only are unlikely to be strong candidates for a reclaim on unsuitability grounds.
• A property with major structural defects, serious mould and damp, no heating, and wider habitability issues may be arguable, but only if the evidence shows the defects were severe enough at completion to make it unsuitable for use as a dwelling.
• A property with no gas, no electricity and lead pipes might or might not qualify. The absence of services may help, but it will not be enough in every case. The wider factual condition matters.

This is why some claims are paid and others are not. HMRC is not simply refusing all claims. It is scrutinising whether the legal test is actually met.

Outcome

The practical conclusion is that HMRC does still pay SDLT reclaim cases where the claim is both legally valid and properly made. However, defects such as lead pipes, missing utilities, damp, mould or lack of heating do not automatically justify a refund.

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. Many properties in poor or dated condition will still count as residential for SDLT purposes.

Practical Steps

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

• identify the completion date and confirm the SDLT treatment originally used;
• gather all evidence showing the property’s condition at that date;
• separate ordinary disrepair from truly serious defects affecting suitability for use as a dwelling;
• review whether the defects were temporary, repairable, or merely part of a renovation project;
• check whether the claim is still within the relevant time limits and procedural route;
• compare the facts carefully with current case law, especially Mudan; and
• obtain a proper legal analysis before submitting or reviving a claim.

Where a previous adviser has withdrawn, it is worth checking whether the problem was with HMRC’s process, the evidence, or the legal strength of the case itself.

Conclusion

HMRC is still paying SDLT refund claims in appropriate cases. But success depends on proving that the property was genuinely not suitable for use as a dwelling at completion, and that is now a relatively demanding test. Ordinary defects, renovation needs and outdated services will often fall short.

Legal References Used

• Finance Act 2003
• 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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