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

Introduction

Many buyers ask whether they can reclaim Stamp Duty Land Tax (SDLT) if the property they bought was in such poor condition that it could not be lived in at completion. This usually comes up where a house was derelict, unsafe, missing basic services, or in a ruinous state when purchased.

The issue matters because the SDLT treatment can change significantly if the property was not a residential dwelling at the effective date of the transaction. But these claims are closely examined by HMRC, and recent case law has made the legal threshold harder to meet. Readers often search for this topic because they have heard of “not suitable for use” claims and want to know whether their own purchase qualifies.

The Question

A buyer purchased a residential-looking property and later considered whether an SDLT reclaim might be available on the basis that, at completion, the building was allegedly uninhabitable or not suitable for use as a dwelling. Survey material, videos and transaction documents were being gathered to assess whether the claim had merit and whether HMRC would be likely to challenge it.

Nick’s Explanation

Nick’s view, in anonymised form, was that this kind of claim can sometimes be arguable where a property is in a genuinely ruinous condition, but HMRC are very resistant to such claims and commonly open enquiries.

His key points were:

• HMRC often operate on a “pay now, check later” basis, so an initial repayment does not mean the claim is safe.
• If HMRC later rejects the claim, the SDLT may have to be repaid.
• These cases frequently require substantial evidence and defence work.
• Timing can matter in practice, because HMRC’s handling of these claims has led to delays and procedural steps directed to the claimant.

In substance, Nick explained that a claim may have merit if the property condition was truly severe, but a buyer should expect scrutiny and should not assume that poor condition alone is enough.

The Law

SDLT on land transactions is governed by the Finance Act 2003. Whether higher residential rates or non-residential or mixed rates apply depends on the nature of the subject matter acquired at the effective date of the transaction.

For these purposes, a central question is whether the property included a “dwelling”. The legislation does not simply ask whether the building was once used as a home or was intended to be renovated. The question is whether, at the relevant date, it was suitable for use as a dwelling.

The leading authorities on this area include:

• Mudan and another v The Commissioners for HMRC
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

The Court of Appeal in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 confirmed that the threshold for showing a property was not suitable for use as a dwelling is now relatively high. The court’s approach means that serious disrepair, the need for renovation, or even substantial works will not automatically prevent a building from being a dwelling for SDLT purposes.

What matters is the condition of the property at completion, viewed realistically and objectively. The test is not whether the property was attractive, mortgageable, modernised, or immediately comfortable. The question is whether it was suitable for use as a dwelling in the legal sense.

Analysis

When assessing a possible SDLT reclaim on this ground, the analysis usually works in the following stages.

First, identify the effective date of the transaction, usually completion. The property’s condition at that date is what matters most. Later deterioration, strip-out works, or post-completion discoveries may be relevant only if they prove the true condition at completion.

Second, examine the physical condition of the building. Evidence may include:

• a survey or valuation report
• photographs and videos taken close to completion
• the sale contract and replies to enquiries
• completion statements and title documents
• builder reports, utility records, or local authority material where available

Third, distinguish between a property that needs work and a property that is genuinely not suitable for use as a dwelling. This is the critical legal divide. A building may still be a dwelling even if it has:

• serious damp
• outdated kitchens or bathrooms
• defective electrics
• heating problems
• water damage
• structural concerns that require repair

After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition thresholds are relatively high in uninhabitable or not suitable for use cases. The fact that a buyer intended a full refurbishment, or that the property was described commercially as derelict, is not enough by itself.

Fourth, consider whether the building retained the essential character of a dwelling. HMRC and the courts will ask whether, despite disrepair, it remained recognisable and usable as a residence. If the answer is yes, even in a limited or basic sense, the reclaim position becomes much weaker.

Fifth, assess litigation and enquiry risk. Even where a case is arguable, HMRC may open an enquiry, request detailed evidence, and challenge the claim robustly. That practical reality matters because a buyer needs to be prepared for delay, correspondence and possible repayment if the claim fails.

Outcome

The practical conclusion is that a reclaim may be possible only in a narrow category of cases where the property’s condition at completion was so severe that it was objectively not suitable for use as a dwelling.

A property being run-down, neglected, unmortgageable, or in need of major renovation does not necessarily meet that test. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold is now relatively high, and many claims that might once have seemed arguable will face significant difficulty.

If the facts show a truly ruinous building, there may still be a case. But buyers should expect HMRC scrutiny and should not treat an initial repayment as final acceptance.

Practical Steps

If you want to assess your position, gather the core transaction documents and condition evidence first. In practice, this usually includes:

• the TR1 transfer
• the signed sale contract
• the SDLT5 certificate
• the completion statement
• survey reports
• photos and videos showing the condition at or very near completion
• any contractor or engineer reports prepared around the purchase date

Then ask the following questions:

• What exactly was wrong with the property at completion?
• Were the defects cosmetic, serious, or fundamental?
• Could a person realistically have occupied it as a dwelling, even in a basic way?
• Does the evidence prove the condition at the relevant date, not just later?
• Is the claim still within the amendment or overpayment relief time limits, if applicable?

If a claim is made, keep copies of everything sent to HMRC and be ready for follow-up forms or direct correspondence. Where HMRC sends forms to the claimant rather than the agent, those should be dealt with carefully and promptly.

Conclusion

You can only reclaim SDLT on a “not suitable for use as a dwelling” basis where the facts are strong and the evidence shows the property crossed a high legal threshold at completion. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, poor condition alone is usually not enough. The key question is whether the building was objectively unsuitable for use as a dwelling on the effective date of the transaction.

Legal References Used

• Finance Act 2003
• Mudan and another v The Commissioners for HMRC
• 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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