SDLT Reclaims on Uninhabitable Homes After Mudan
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Can you reclaim SDLT if the house was uninhabitable when you bought it?
Introduction
Many buyers ask whether they can reclaim Stamp Duty Land Tax (SDLT) if the property they bought was in such poor condition that nobody could reasonably live in it at the time of purchase. This question often comes up where a house needed major works, such as replacing floors or ceilings, fixing serious leaks, dealing with dangerous electrics, or installing basic heating.
The issue matters because a property that is not “suitable for use as a dwelling” may fall to be taxed at non-residential rates rather than residential rates. In some cases, that can produce a repayment. A separate issue can also arise where the buyer paid the higher rates for an additional dwelling and later sells their previous home.
The difficulty is that the legal test for “not suitable for use as a dwelling” is now interpreted quite strictly. In particular, the threshold in uninhabitable cases is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
The Question
A married couple bought a house for £525,000 and paid SDLT at the higher residential rates because they still owned another home at the time. The newly purchased house was said to be in very poor condition when bought. The reported problems included dangerous conditions, missing floors and ceilings, multiple leaks, no central heating, exposed cables, and a very poor energy rating. The buyers expected the renovation works to take around ten months in total before the property became fit to live in.
They wanted to know whether, in addition to any later refund of the 3% higher rates surcharge when their former home sold, they might also be entitled to a further SDLT repayment on the basis that the purchased house was uninhabitable at completion.
Nick’s Explanation
Nick’s view was that this type of case can potentially support a repayment claim where the property was genuinely derelict at the effective date of the transaction, the higher rates were paid, and the purchase was still within the amendment window.
He explained the basic point this way: if a property was not suitable for use as a dwelling at the time of purchase, it may be taxed at non-residential rates instead of residential rates. That can reduce the SDLT liability.
He also highlighted a practical issue with HMRC’s approach. In anonymised form, his point was:
“HMRC may initially process a claim and pay a refund, but later open an enquiry and argue that the repayment should not have been made. Because of that, it is important to put forward the strongest factual and legal case possible from the outset.”
Nick further noted that, for purchases before 2 October 2024, the older case law test was generally more favourable to taxpayers than the stricter approach now applied after legislative change and later authority. Even so, he recognised an important weakness in some renovation cases: a property may be in very bad condition, but if the defects are repairable rather than fundamental and irremediable, HMRC may argue that it was still a dwelling for SDLT purposes.
The Law
SDLT is charged under the Finance Act 2003. The key issue in these cases is whether the subject matter of the transaction was residential property. Broadly, a building counts as residential property if it 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, it may instead be treated as non-residential property. That can make a substantial difference to the rate charged.
For many years, disputes turned on case law about what “suitable for use as a dwelling” meant in practice. The older authorities allowed room for argument where a property was so dangerous or dilapidated that it needed more than ordinary repair or renovation before anyone could live there.
However, the legal position became significantly tighter. The Finance Act 2003 was amended with effect from 2 October 2024 so that a building is not unsuitable for use as a dwelling merely because it is in need of repair or renovation, or because the purchaser intends to repair or renovate it. That amendment was aimed at restricting uninhabitable dwelling claims.
In addition, the courts have adopted a demanding approach to these disputes. In Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the Court of Appeal confirmed that the threshold is relatively high. In an uninhabitable or not suitable for use case, serious disrepair alone will not necessarily be enough. The condition must be assessed carefully against the statutory test and the authorities.
Separately, where a buyer pays the higher rates for an additional dwelling because they still own a previous main residence, there may be a refund of the 3% surcharge if the previous main residence is sold within the statutory time limit and the other conditions are met. That is a different relief from any argument that the purchased property was non-residential.
Analysis
The first step is to separate the two possible repayment routes.
One route is the replacement of main residence refund. If the buyers paid the higher rates because they had not yet sold their former home, they may later reclaim the additional 3% if that former home is sold within the required period and the statutory conditions are satisfied.
The second route is the “not suitable for use as a dwelling” argument. This is the more difficult point.
On the facts described, the property appears to have been in genuinely poor condition at completion. Missing floors and ceilings, dangerous electrics, multiple leaks, lack of central heating, and a lengthy programme of works all point towards a serious state of disrepair. Those facts are relevant and helpful.
But they are not automatically decisive. The legal question is not simply whether the property was unpleasant, expensive to repair, or temporarily impossible to occupy in comfort. The question is whether, at the effective date of the transaction, it was suitable for use as a dwelling for SDLT purposes.
For a purchase in August 2024, the timing matters. That was before 2 October 2024, so the buyer may still seek to rely on the earlier legal framework rather than the amended statutory wording. That is better than buying after the change in law.
Even so, the current litigation climate is unfavourable. Following Mudan, the courts are unlikely to accept every severe renovation case as non-residential. The threshold is now understood to be relatively high. A buyer would need strong evidence that the property’s defects went beyond ordinary or even extensive repair and made it not suitable for use as a dwelling in the relevant legal sense.
Evidence would matter greatly. Useful material may include:
- survey reports prepared close to completion;
- photographs and videos showing the condition on the purchase date;
- sales particulars describing the property as derelict or for refurbishment;
- contractor reports confirming the nature and extent of the defects;
- electrical or structural reports identifying danger or missing essential elements;
- evidence that basic facilities could not safely be used at completion.
Even with that evidence, HMRC may still argue that the building remained a dwelling because the defects were repairable. That is especially likely where the property retained the basic character of a house and was restored through renovation rather than reconstruction.
Nick’s practical point about HMRC enquiries is also important. In these cases, a repayment may be claimed within the amendment period, but HMRC may then review the claim and challenge it. So the issue is not just whether a claim can be filed, but whether it can be defended if examined.
Outcome
The practical conclusion is this:
- The buyers may well be able to reclaim the 3% higher rates surcharge once their previous main residence is sold, assuming the normal conditions are met.
- A further SDLT repayment based on the purchased property being uninhabitable is possible in principle, especially for a pre-2 October 2024 purchase.
- However, that second argument is far from guaranteed. The legal threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
- A strong claim would depend on detailed evidence showing that the property was not suitable for use as a dwelling at the completion date, not merely that it needed extensive repairs.
Practical Steps
If you are assessing a similar case, the sensible next steps are:
- Confirm the effective date of the transaction. The position is materially different for purchases before and after 2 October 2024.
- Work out exactly what SDLT was paid, including whether the 3% higher rates surcharge applied.
- Collect evidence of the property’s condition at completion, including surveys, photographs, reports, invoices, and sales particulars.
- Identify whether the defects were temporary and repairable, or whether they were so fundamental that the building could not properly function as a dwelling.
- Consider the separate replacement of main residence refund if you still owned your former home when you bought the new one.
- Check whether you are still within the statutory time limit to amend the SDLT return or make the relevant reclaim.
- Before submitting any uninhabitable dwelling claim, assess whether the evidence is strong enough to withstand an HMRC enquiry.
Conclusion
A house in very poor condition does not automatically qualify for an SDLT refund. There may be two different repayment issues: a refund of the higher rates surcharge after sale of the former home, and a separate argument that the purchased property was not suitable for use as a dwelling. The second route can succeed, but it is evidence-heavy and now faces a demanding legal threshold, particularly in light of Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
Legal References Used
- Finance Act 2003
- Finance Act 2003, provisions defining residential property and dwellings for SDLT purposes
- Finance Act 2003, higher rates for additional dwellings provisions
- 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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