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

Introduction

Many buyers ask whether they can reclaim Stamp Duty Land Tax (SDLT) because the property they bought was in very poor condition. The issue usually arises where the buyer believes the property was not suitable for use as a dwelling on the effective date of the transaction. If that is right, the purchase may fall outside the residential rates and, in some cases, a refund may be due.

This is a technical area. The legal test is not whether a property needed work, was dated, or was unpleasant to live in. The question is whether, at completion, it was truly unsuitable for use as a dwelling. That threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A buyer wants to know whether SDLT can be reclaimed on the basis that the property purchased was not suitable for use as a dwelling at the time of purchase. The concern is whether the condition of the building was serious enough to take it outside the normal residential SDLT rules.

Nick’s Explanation

Nick’s explanation was that any reclaim in this area must be approached carefully and in line with HMRC guidance. The central point is that not every defective or run-down property qualifies. A buyer needs to show that, at the relevant date, the property was genuinely not suitable for use as a dwelling, rather than simply needing repair, renovation or modernisation.

In anonymised terms, his reasoning can be summarised like this: a compliant reclaim depends on the actual condition of the property at completion, the legal test in the legislation, and the way HMRC and the courts apply that test. Evidence matters. Assertions that a property was “uninhabitable” are not enough on their own.

The Law

SDLT is charged under the Finance Act 2003. Whether property is taxed at residential or non-residential rates depends on the nature of the subject matter acquired at the effective date of the transaction.

The key issue in these cases is whether the property was “suitable for use as a dwelling”. That wording appears in the SDLT rules dealing with residential property. If a building is suitable for use as a dwelling, it is generally treated as residential property even if it is in poor repair.

HMRC’s published guidance has long taken the view that the test is a practical one applied at the effective date of the transaction. The courts have also considered this wording in a number of cases. The modern approach is strict: serious disrepair does not automatically prevent a building from being suitable for use as a dwelling.

Where buyers argue that a property was not suitable for use as a dwelling, they usually rely on evidence such as survey reports, photographs, contractor reports, utility issues, structural problems, or serious health and safety defects. Even then, the defects must be significant enough to cross the legal threshold.

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

The analysis usually works in five steps.

First, identify the exact state of the property on the effective date of the transaction, usually completion. Later works do not decide the issue. The focus is on the condition at that moment.

Second, separate serious unsuitability from ordinary disrepair. A property can be old, dirty, damp, lacking modern fittings, or in need of substantial refurbishment and still remain suitable for use as a dwelling. The fact that a buyer intended to strip it out or renovate it does not by itself help.

Third, consider whether the defects made occupation as a dwelling genuinely unrealistic. Examples sometimes argued include the absence of a functioning kitchen or bathroom, dangerous structural instability, severe contamination, lack of basic services, or conditions presenting major safety risks. But even these points are not automatic winners; the tribunal and courts look at the whole picture.

Fourth, compare the facts with HMRC guidance and the case law. The courts have repeatedly rejected claims where the property was plainly in poor condition but still retained the basic character of a dwelling. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the bar is high. The question is not whether the property was comfortable, mortgageable, or attractive to live in. The question is whether it was suitable for use as a dwelling in the statutory sense.

Fifth, test the evidence. Strong cases usually require contemporaneous material: survey reports prepared near completion, dated photographs, invoices showing urgent remedial works, correspondence identifying dangerous defects, and any official notices or expert opinions. Without that evidence, a reclaim is difficult to sustain.

Outcome

The practical conclusion is that an SDLT reclaim on this ground is only likely to succeed where the property’s condition at completion was so serious that it was not suitable for use as a dwelling in law. A property that merely needed renovation, updating or repair will usually still be treated as residential.

Because the threshold is now relatively high, many claims based only on poor condition will not succeed. Buyers should assess the evidence carefully before assuming that a refund is available.

Practical Steps

If you want to assess your position, the sensible next steps are:

• Obtain the survey, valuation and any specialist reports that existed at or near completion.
• Collect dated photographs showing the property’s actual condition at that time.
• Identify any defects affecting basic occupation, safety or essential facilities.
• Check whether there were official notices, insurance issues, or expert recommendations showing the property could not realistically be used as a dwelling.
• Compare the facts against HMRC guidance and the current case law, especially the stricter approach confirmed in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
• Review the SDLT return and the basis on which tax was originally calculated.
• Take advice before making a reclaim, because unsupported or weak claims may be challenged by HMRC.

Conclusion

A buyer can only reclaim SDLT on this basis if the property was truly not suitable for use as a dwelling at completion. That is a demanding test. Poor condition, even severe disrepair, is not always enough. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold for showing unsuitability is relatively high, so the evidence and the exact facts are critical.

Legal References Used

• Finance Act 2003
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799
• HMRC SDLT guidance on whether property is suitable for use as a dwelling

This page was last updated on 22 March 2026.

See all questions and answers categorized in this sitemap. Or use Google site search below.