Can you reclaim SDLT because a property was not suitable for use as a dwelling?

Introduction

Many buyers search for this issue after purchasing a property with serious defects such as damp, asbestos, unsafe services or major disrepair. The usual question is whether the property was so poor at the effective date of the transaction that it was not suitable for use as a dwelling for Stamp Duty Land Tax purposes. If that test is met, the purchase may fall outside the residential SDLT rates and a refund may be due.

This is a fact-sensitive area. It is not enough that a property needed refurbishment or that works were planned. The condition must have been serious enough at completion to prevent the building from being suitable for use as a dwelling. Recent case law has made that threshold harder to satisfy.

The Question

A pair of buyers asked whether they had strong SDLT reclaim cases for two purchased properties. They had reports referring to issues including damp and asbestos, and they wanted to know whether the condition of the properties at the time of purchase could support a reclaim on the basis that the dwellings were not suitable for use.

They also wanted to know what evidence would be needed and what the next steps would be, particularly where one of the transactions was older and the time limit for amending or reclaiming SDLT might be approaching.

Nick’s Explanation

Nick’s initial view was positive in principle, but it depended on the condition of the properties at the time of purchase and on having the right supporting material. In anonymised form, his position can be summarised like this:

“Assuming the condition at the time of purchase was as shown in the reports, and the case is put forward correctly, the reclaim should be strong.”

That said, the later follow-up made an important practical point: a claim of this kind stands or falls on evidence. The buyers were asked for material such as photographs from around completion, survey reports, invoices for remedial works, and any failed gas or electrical safety documents. They were also asked for the conveyancing documents, including the transfer, sale contract, SDLT certificate and completion statement.

That approach is sensible. In SDLT suitability cases, the main issue is usually not the legal test itself but whether the buyer can prove the condition of the property on the effective date of the transaction.

The Law

SDLT is charged under the Finance Act 2003. The residential rates generally apply where the subject matter of the transaction consists of land that includes a dwelling. Whether a building is a “dwelling” is determined at the effective date of the transaction, usually completion.

The key question in these cases is whether the property was suitable for use as a dwelling at that date. If it was not suitable for use as a dwelling, it may not count as residential property for SDLT rate purposes, which can change the tax treatment significantly.

The legislation itself is in Finance Act 2003, especially the provisions dealing with residential property and dwellings in section 116 and the charging framework in Part 4. The detailed meaning of “suitable for use as a dwelling” has largely been developed through case law.

The courts have repeatedly said that the test is an objective one. It is not about the buyer’s personal plans, whether they intended to renovate, or whether the property would be attractive to an ordinary purchaser. The question is whether, looked at objectively on completion, the building was suitable for use as a dwelling.

In an uninhabitable or not suitable for use case, the condition threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That decision reinforces that serious disrepair, contamination or missing items do not automatically mean a property fails the dwelling test. The defect must be sufficiently severe to mean the building was not suitable for use as a dwelling at the effective date.

Analysis

The analysis usually works in five steps.

First, identify the effective date of the transaction. This is usually completion. The property must be assessed in the condition it was in on that date, not before and not after later strip-out or renovation works.

Second, identify the actual defects present at that date. Common examples raised in claims include:

• serious structural movement
• extensive penetrating damp or water ingress
• unsafe or failed electrical systems
• unsafe or non-functioning gas installations
• absence of basic facilities such as a usable kitchen or bathroom
• contamination or hazardous materials
• fire or flood damage

Third, ask whether those defects made the building objectively unsuitable for use as a dwelling. This is the critical step. A property can be unpleasant, run-down, or in need of substantial modernisation and still remain suitable for use as a dwelling. Likewise, the presence of asbestos or damp does not by itself answer the question. Much depends on extent, severity, risk, and whether the property could still realistically be lived in as a dwelling at completion.

Fourth, test the evidence. HMRC and the tribunal will usually expect contemporaneous documents. The strongest evidence often includes:

• survey reports prepared close to completion
• dated photographs showing the actual condition
• gas or electrical reports showing failure or danger
• contractor invoices for urgent remedial works immediately after purchase
• the legal completion paperwork
• any lender or insurer material showing the property was not fit for occupation

Fifth, check the time limit. SDLT amendment and overpayment relief rules are strict. Where a transaction is older, urgency matters. A buyer should not assume they can revisit the SDLT position indefinitely.

Applying that framework to a case involving damp and asbestos reports, those reports may help, but they are not automatically enough. The real issue is what the reports say about the severity of the problem and whether they support the conclusion that the property was not suitable for use as a dwelling at completion. If the reports only show that the property needed works, remediation, or cautious management, that may fall short. If they show a level of danger or disrepair that prevented normal residential occupation, the case is stronger.

Following Mudan, buyers should be especially careful about assuming that extensive repairs or health and safety concerns necessarily mean the property was not a dwelling. The current legal position sets a comparatively high bar.

Outcome

The practical conclusion is that a buyer may be able to reclaim SDLT if the property was genuinely not suitable for use as a dwelling at completion, but the threshold is demanding and has become harder to meet after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

A report mentioning damp, asbestos or disrepair may support a claim, but it does not guarantee one. The buyer needs strong contemporaneous evidence showing that the defects were serious enough to make the property objectively unsuitable for use as a dwelling on the effective date.

Practical Steps

If you are assessing a possible SDLT reclaim on this basis, gather the following as soon as possible:

• survey reports dated close to exchange or completion
• photographs showing the condition at purchase
• gas and electrical inspection results, especially any failed or unsafe certificates
• quotes, invoices and schedules of urgent remedial works
• the signed transfer, contract, SDLT filing certificate and completion statement
• any mortgage valuation or lender comments about habitability

Then review the evidence against the legal test, not against a general sense that the property was in poor condition. Ask:

• Could the building objectively be used as a dwelling at completion?
• Were the defects merely serious disrepair, or did they go further and prevent residential use?
• Is there contemporaneous evidence proving that position?
• Are you still within the relevant SDLT time limit?

If one transaction is older, prioritise that file first because time limits may affect whether a claim can still be made.

Conclusion

A property does not cease to be residential for SDLT just because it needs work. To support a reclaim, the condition at completion must have made it not suitable for use as a dwelling, and that is now a relatively high threshold. Strong, dated evidence is essential, and the position should be checked promptly where the purchase was some time ago.

Legal References Used

• Finance Act 2003, Part 4
• 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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