Can you reclaim the 3% SDLT surcharge if a property was in poor condition when you bought it?

Introduction

Many buyers ask whether they can reclaim Stamp Duty Land Tax (SDLT), especially where they paid the 3% higher rates and the property was affected by damp, mould, neglect or other serious defects at the date of purchase.

This question usually arises where the buyer believes the dwelling was not suitable for use as a home when they completed the purchase. If that is right, the transaction may not have involved the purchase of a “dwelling” for SDLT purposes, which can affect whether the higher residential rates applied.

However, the legal threshold is now relatively high. In particular, in uninhabitable or not suitable for use cases, the Court of Appeal decision in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 makes clear that serious disrepair alone will not always be enough.

The Question

A common scenario is this:

A buyer purchased a property in England or Northern Ireland within the last four years. At the date of purchase, the property had significant condition issues such as damp, mould, neglect or other hazards. The buyer paid the 3% SDLT higher rates and now wants to know whether an SDLT reclaim may be possible.

Nick’s Explanation

Nick’s core point was that some buyers may have grounds to review their SDLT position where all of the following apply:

• the purchase took place within the last four years;
• the property was in England or Northern Ireland;
• the property had serious condition problems at completion; and
• the buyer paid the 3% higher rates of SDLT.

In anonymised form, his message was essentially that where a property had serious hazards at purchase, it may be worth checking whether the SDLT treatment was correct and whether a reclaim is available.

That said, any such review must now be approached carefully. The fact that a property had damp, mould or neglect does not automatically mean it was not a dwelling for SDLT purposes.

The Law

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

The 3% higher rates for additional dwellings are imposed by Schedule 4ZA to the Finance Act 2003. Broadly, those rates apply where:

• the transaction is for a major interest in a single dwelling;
• the buyer already owns, or is treated as owning, another dwelling; and
• the other conditions in Schedule 4ZA are met.

A key issue in some refund cases is whether the property purchased was a “dwelling” at the effective date of the transaction. If it was not suitable for use as a dwelling at that time, the higher residential rates may not have applied in the way originally assumed.

The case law on suitability for use has developed significantly. The courts have repeatedly treated this as a fact-sensitive question focused on the condition of the property at completion.

Most importantly for current claims, Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 shows that the threshold for proving a property was not suitable for use as a dwelling is relatively high. The court’s approach means that many properties in poor or even very poor condition will still count as dwellings for SDLT purposes.

Analysis

The analysis usually proceeds in stages.

First, identify the date of purchase. SDLT amendment and repayment claims are subject to time limits. A buyer asking about a reclaim will usually need to be within the relevant statutory time limit, which is often four years from the effective date of the transaction for an overpayment relief-style review, though the exact route depends on the procedural history of the return.

Second, confirm the location. SDLT applies to land transactions in England and Northern Ireland. Purchases in Scotland and Wales are governed by different taxes.

Third, consider what was actually wrong with the property at completion. The legal question is not simply whether the property was unattractive, neglected or in need of renovation. The question is whether, viewed realistically at the effective date, it was suitable for use as a dwelling.

Examples often relied on by buyers include:

• serious damp or mould;
• structural issues;
• lack of functioning kitchen or bathroom facilities;
• unsafe electrics;
• water ingress;
• contamination or infestation; and
• general dereliction.

Even so, the courts have drawn a distinction between a property that needs repair and a property that truly cannot be used as a dwelling. Following Mudan, the bar is now high. A property may still be a dwelling even if it is unpleasant, run-down, or requires substantial works before comfortable occupation.

Fourth, ask whether the buyer paid the 3% higher rates because the property was treated as an additional dwelling. If the property was in fact not a dwelling at completion, there may be an argument that the surcharge was wrongly charged. But that conclusion does not follow automatically from the presence of defects.

Fifth, review the evidence. The strength of any reclaim usually depends on contemporaneous material, such as:

• the survey report;
• valuation evidence;
• photographs taken before or at completion;
• mortgage retention or refusal evidence;
• contract papers and special conditions;
• builder or contractor reports; and
• any local authority or environmental health material.

Sixth, compare the facts against the current legal standard. This is where many claims fail. Damp, mould and neglect may support the argument, but unless the defects were so serious that the property was not suitable for use as a dwelling at the effective date, HMRC is likely to resist a reclaim.

Outcome

A buyer may have grounds to review an SDLT reclaim if they bought in England or Northern Ireland within the last four years, paid the 3% higher rates, and the property had very serious defects at completion.

But the practical conclusion is cautious: poor condition alone is not enough. In uninhabitable or not suitable for use cases, the condition threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Many properties with damp, mould, disrepair or neglect will still be treated as dwellings for SDLT purposes.

Practical Steps

If you want to assess whether a reclaim may be possible, the sensible steps are:

1. Check the completion date to see whether you are still within time.
2. Confirm that the property was in England or Northern Ireland.
3. Obtain the SDLT return and confirm whether the 3% higher rates were paid.
4. Gather all contemporaneous evidence about the property’s condition at completion.
5. Focus on whether the property was genuinely unsuitable for use as a dwelling, not merely in need of works.
6. Compare the facts carefully with the current case law, especially Mudan.
7. If a reclaim is pursued, ensure the legal basis and evidence are clearly set out.

Conclusion

It is possible in some cases to reclaim SDLT where a property was not suitable for use as a dwelling when purchased. But those cases are narrower than many buyers assume. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold is relatively high, so a careful fact-and-evidence review is essential before concluding that a refund is due.

Legal References Used

• Finance Act 2003
• Finance Act 2003, Schedule 4ZA
• 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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