Can you get an SDLT refund if a property needed renovation but was still habitable?

Introduction

Many buyers ask whether they can reclaim Stamp Duty Land Tax (SDLT) because the property they bought was in poor condition and needed substantial work. The key issue is usually whether, at the effective date of the transaction, the property was truly unsuitable for use as a dwelling.

This matters because a property that is not suitable for use as a dwelling may fall outside the normal residential SDLT rules. However, the legal threshold is now relatively high. A property that is simply dated, damaged, or in need of renovation will often still be treated as residential for SDLT purposes.

The Question

A buyer provided survey material after purchasing a residential property and asked whether they might be entitled to an SDLT refund on the basis that the property was in poor condition. The general question was whether the condition of the property was serious enough to show that it was not suitable for use as a dwelling at the relevant time.

Nick’s Explanation

Nick’s view was that the property appeared to need renovation, but did not appear to be derelict. In anonymised terms, his reasoning was that SDLT is a self-assessed tax, so the taxpayer must be satisfied that any refund claim is properly supported by the facts and the law.

His practical conclusion was that, on the available material, HMRC would be likely to regard the property as still suitable for use as a dwelling. If that is right, the purchase remains taxable at residential rates and there is unlikely to be a valid refund claim based only on disrepair or the need for modernisation.

The Law

SDLT is charged under the Finance Act 2003. Whether property is residential or non-residential is important because different rate structures apply.

Under section 116 of the Finance Act 2003, property is “residential property” if it consists of or 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;
• land that forms part of the garden or grounds of such a building; or
• an interest or right over land that subsists for the benefit of such a building or land.

In disputes of this kind, the central question is usually whether the building was “suitable for use as a dwelling” on the effective date of the transaction.

The recent Court of Appeal decision in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 is particularly important. It confirms that the threshold for showing that a property was not suitable for use as a dwelling is relatively high. A property does not cease to be residential merely because it is run-down, lacks modern fittings, needs extensive repair, or requires significant refurbishment. The question is one of suitability for use, not whether the property is attractive, modern, mortgageable, or ready for immediate comfortable occupation.

Analysis

The analysis usually works in the following steps.

1. Identify the condition of the property at the effective date

   The relevant date is normally completion. Evidence such as surveys, photographs, invoices, and contemporaneous correspondence may help show the true condition at that time.

2. Ask whether the defects go beyond disrepair and renovation needs

   Many properties are purchased needing rewiring, damp treatment, replacement kitchens or bathrooms, heating repairs, plastering, window repairs, or general modernisation. Those problems may be serious in practical terms, but they do not automatically mean the building was unsuitable for use as a dwelling.

3. Apply the high legal threshold

   Following Mudan, the threshold is relatively high. The issue is whether the building had genuinely crossed the line from being a dwelling in poor condition to being incapable of being used as one. Evidence would usually need to show something more fundamental than ordinary dilapidation or refurbishment need.

4. Consider HMRC’s likely approach

   HMRC commonly argue that a property remains residential if it still has the basic character of a dwelling, even if it is in bad condition. If the property was capable of occupation with repair or cleaning, HMRC are likely to maintain that residential SDLT rates applied.

5. Assess whether a refund claim is realistically supportable

   If the evidence shows only that the property needed renovation, a refund claim is unlikely to succeed. A stronger case would require clear evidence that, at completion, the property was not suitable for use as a dwelling in any real sense.

On the facts described here, the better view is that the property needed renovation but was not derelict. That points strongly towards residential treatment rather than a refund.

Outcome

If a property merely required renovation, refurbishment, or repair, that will usually not be enough to obtain an SDLT refund on the basis that it was uninhabitable. In light of Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition threshold is now relatively high. A buyer in this position should assume that HMRC are likely to treat the property as suitable for use as a dwelling unless the evidence shows something much more serious than ordinary disrepair.

Practical Steps

• Review the condition of the property as it stood on completion, not after works began.
• Gather contemporaneous evidence such as survey reports, dated photographs, contractor opinions, and legal correspondence.
• Separate true structural or functional incapacity from general renovation issues.
• Compare the facts carefully against section 116 of the Finance Act 2003 and the reasoning in Mudan.
• Be realistic about HMRC’s likely position if the property still retained the basic character of a dwelling.
• If considering a reclaim, make sure the factual basis is strong enough to justify a self-assessed amendment or repayment claim.

Conclusion

A property that is shabby, damaged, or in need of major refurbishment is not necessarily uninhabitable for SDLT purposes. The legal test is stricter than many buyers expect. Where the property appears to need renovation but is not truly derelict or fundamentally incapable of use as a dwelling, residential SDLT rates will usually still apply and a refund claim is unlikely to succeed.

Legal References Used

• 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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