Can you reclaim SDLT on a buy-to-let property with damp or repair issues?

Introduction

Many landlords ask whether stamp duty land tax (SDLT) can be reclaimed where a property was in poor condition when bought. A common example is a buy-to-let property with damp, disrepair, or other defects that needed work before it could be let out.

The key issue is whether the property was genuinely unsuitable for use as a dwelling on the effective date of the transaction. If it was, the purchase may in some cases have been taxed at non-residential rates rather than residential rates. But this area has become much harder for taxpayers, and the legal threshold is now relatively high.

The Question

A property investor bought two buy-to-let properties before 1 October 2024. Both properties had repair issues, especially damp, and remedial works were carried out before the properties were let. The investor wanted to know whether those condition issues could support an SDLT reclaim on the basis that the properties were not suitable for use as dwellings at completion.

Nick’s Explanation

Nick reviewed the material provided and explained that the condition test is strict. In anonymised form, his view was that before 1 October 2024 a property could potentially fall outside residential treatment if it was effectively too dangerous to live in and required more than minor renovation or repair. He also explained that, after the legislative change, the test became even narrower.

Nick’s practical conclusion was that, on the facts presented, HMRC would be unlikely to accept a reclaim for either property. He also noted that this area had been the subject of developing case law, so taxpayers should keep an eye on further legal developments.

The Law

SDLT on land transactions is charged under the Finance Act 2003. Whether a property is taxed at residential or non-residential rates depends on the statutory definition of “residential property”.

Under section 116 Finance Act 2003, residential property includes a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use. If a building is not suitable for use as a dwelling at the effective date of the transaction, the taxpayer may argue that the purchase should not have been taxed as residential property.

For transactions with an effective date before 1 October 2024, disputes often turned on whether the property was suitable for use as a dwelling as a matter of fact and degree. Case law showed that serious disrepair could sometimes make a property unsuitable, but ordinary defects, dated condition, or repair needs were usually not enough.

For transactions from 1 October 2024 onwards, Parliament introduced a stricter rule. The legislation now narrows the circumstances in which a building in poor condition can be treated as unsuitable for use as a dwelling. In broad terms, the post-1 October 2024 position is much less favourable to reclaim arguments based on disrepair.

In addition, the Court of Appeal decision in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 confirms that the condition thresholds in uninhabitable or not suitable for use cases are now relatively high. The fact that a property needs substantial work, including damp treatment or refurbishment, does not by itself mean it was unsuitable for use as a dwelling for SDLT purposes.

Analysis

The starting point is the condition of the property at completion, not what happened afterwards. The question is not whether repairs were needed before the property could be profitably let, nor whether a prudent landlord would choose to carry out works before occupation. The question is whether the building was suitable for use as a dwelling on the effective date of the purchase.

That distinction matters. A property can be unattractive, outdated, damp, or in poor repair and still remain a dwelling for SDLT purposes. Many older buy-to-let properties need remedial work before being let to tenants, but that does not automatically move them into the non-residential SDLT regime.

In a damp and disrepair case, HMRC and the tribunals will usually look for evidence such as:

• whether there was a functioning kitchen and bathroom;
• whether basic services such as water, electricity and sanitation were available;
• whether the structure was fundamentally unsafe;
• whether occupation would have been dangerous rather than merely uncomfortable;
• whether the defects were repairable by ordinary building works;
• whether the property was capable of being lived in, even if not in a condition a buyer wanted to accept without works.

If the main issue was damp, even significant damp, that will often be treated as a repair issue rather than proof that the building had ceased to be a dwelling. The same is true of plaster damage, defective finishes, worn kitchens or bathrooms, and general refurbishment needs. The fact that the properties were later repaired and successfully let also tends to suggest that the defects were remediable rather than fundamental.

That is why Nick’s view was cautious. On the information provided, the defects appeared to be repair issues that were capable of being fixed, not fundamental defects taking the properties outside the concept of a dwelling.

The position is now even clearer after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. In an uninhabitable or not suitable for use case, the threshold is relatively high. A taxpayer generally needs much stronger facts than damp, disrepair, or refurbishment works. The modern approach is not satisfied simply because a property was unpleasant, difficult to occupy, or unsuitable for immediate letting.

Outcome

Where a buy-to-let property had damp and needed repairs before being let, an SDLT reclaim is unlikely to succeed unless the condition at completion was exceptionally serious. In most cases, damp and remedial works will not be enough to show that the property was unsuitable for use as a dwelling.

On facts like these, HMRC would be unlikely to accept a reclaim, and the courts now apply a relatively demanding threshold.

Practical Steps

If you are assessing whether an SDLT reclaim may be possible, the sensible steps are:

• identify the effective date of the transaction, because the law changed from 1 October 2024;
• gather contemporaneous evidence from the purchase date, including surveys, photographs, mortgage valuation material and contractor reports;
• focus on the actual condition at completion, not later works or later letting history;
• separate ordinary repair issues from defects that made occupation genuinely dangerous or impossible;
• check whether the property retained basic living facilities and services at the time of purchase;
• review the position in light of Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, which sets a high bar for these arguments.

If the evidence shows only damp, disrepair and refurbishment needs, the prospects of a reclaim are usually weak. Stronger cases tend to involve much more severe facts.

Conclusion

A property does not stop being a dwelling for SDLT purposes just because it has damp or needs repair before it can be let. The legal test is demanding, and after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 the threshold in uninhabitable cases is relatively high. In a typical damp-and-repair buy-to-let case, an SDLT reclaim is unlikely to succeed.

Legal References Used

• Finance Act 2003
• 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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