Can you reclaim SDLT if a property bought at auction needed major structural repairs?

Introduction

Buyers often ask whether they paid too much Stamp Duty Land Tax (SDLT) when they bought a run-down house at auction. The usual argument is that the building was not suitable for use as a dwelling on the effective date of the transaction, so non-residential SDLT rates should have applied instead of residential rates.

This issue matters because some auction properties need major works straight away, such as rebuilding unsupported walls, replacing rotten structural elements, underpinning, or making dangerous parts safe. Even so, the legal test for an “uninhabitable” dwelling is strict. It is not enough that the property was in poor condition, unattractive, or expensive to repair. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold is now relatively high.

The Question

A buyer purchased a residential property at auction and later carried out substantial structural works. The works included rebuilding an extension, reconstructing an outer wall because it lacked foundations, inserting steel support where a rotten timber beam had failed, and underpinning and strengthening part of the front structure.

The buyer wanted to know whether those defects meant the property was legally uninhabitable at completion, so that a refund claim could be made on the basis that non-residential SDLT rates should have applied.

Nick’s Explanation

Nick’s view was cautious. He considered that the property could be described as close to derelict, but he also stressed that HMRC takes a narrow approach to these claims.

In anonymised form, his key points were:

• HMRC generally only accepts this type of claim where the property had fundamental defects making it unsuitable for use as a dwelling at the effective date.
• The argument usually needs to be based on the property being genuinely dangerous or incapable of normal residential occupation, not simply in need of major repair.
• There is a real risk that HMRC may say the original SDLT return was amended on a careless basis if the legal position is weak.
• Even where there is some factual merit, a taxpayer may still struggle to win if the case law is against them.
• Because appellate case law was developing, waiting for the Mudan appeal was a sensible course before deciding whether to proceed.

That caution was well founded. The later Court of Appeal decision in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 confirms that the condition threshold for showing a dwelling was not suitable for use is now relatively high.

The Law

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

The key provisions are in Schedule 4ZA to the Finance Act 2003, which deals with what counts as “residential property”. Broadly, property is residential if it consists of or includes:

• a building that is used or suitable for use as a dwelling, or
• land that is or forms part of the garden or grounds of such a building.

If a building is not suitable for use as a dwelling at the effective date, the buyer may argue that the purchase was not of residential property and that non-residential rates should have been charged instead.

That sounds simple, but the case law has made clear that “not suitable for use as a dwelling” is a demanding test. The courts distinguish between:

• a building that is still a dwelling but in disrepair, even serious disrepair, and
• a building whose physical state is so poor that it has ceased to be suitable for residential use at all.

HMRC’s published guidance has long taken a restrictive view. The courts have also increasingly rejected claims based only on poor condition, deferred maintenance, or repairable defects.

The most important point now is that, in an uninhabitable or not suitable for use case, the condition thresholds are relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Analysis

The right way to analyse a claim like this is step by step.

First, identify the relevant date. The question is not whether the property was difficult to live in before works started, or whether major sums were later spent on it. The question is what its condition was on the effective date for SDLT purposes, usually completion.

Second, separate serious repair needs from legal unsuitability. A property may need:

• structural strengthening,
• replacement walls,
• new support beams,
• underpinning, or
• extensive rebuilding work,

yet still remain a building that is suitable for use as a dwelling in law. The fact that works were necessary, urgent, or expensive does not automatically change the SDLT treatment.

Third, ask whether the defects meant the building could not realistically function as a dwelling at all. Relevant factors may include whether there was:

• serious danger to occupants,
• collapse risk or structural instability affecting normal occupation,
• lack of basic facilities needed for residential use,
• conditions making lawful or safe occupation impossible, or
• damage so extensive that the building had effectively lost its character as a dwelling.

Fourth, consider whether the defects were repairable. Historically, some arguments have tried to draw a distinction between defects that can be repaired and defects that cannot. In practice, however, the courts focus on the actual suitability of the building at the effective date, not simply on whether repairs were possible in theory. Even major structural defects may still leave the property within the residential category if it remains recognisably a dwelling capable of occupation once ordinary repair concepts are applied.

Fifth, apply the modern appellate approach. After Mudan, the hurdle is high. A taxpayer now needs stronger evidence than photographs of disrepair and invoices for substantial works. The evidence must show that, at completion, the property was not merely unattractive or defective but had crossed the line into genuine unsuitability for use as a dwelling.

On facts like these, the presence of rotten structural timber, missing foundations to part of an extension, rebuilding works, and underpinning may suggest major defects. But those facts alone do not guarantee a successful refund claim. Much would depend on whether the building was actually unsafe or incapable of normal residential occupation at completion, and whether contemporaneous evidence supports that conclusion.

That is why Nick’s original caution makes sense. Before the appellate position was settled, some claims had arguable merit but weak prospects if challenged. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, those prospects are narrower still.

Outcome

The practical answer is that a buyer in this situation should not assume that major structural repairs mean SDLT was overpaid. A property can require extensive remedial works and still count as residential property for SDLT.

If the argument is that the dwelling was uninhabitable or not suitable for use, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. On that basis, many claims that once appeared arguable are now much harder to sustain.

Practical Steps

If you are assessing a possible SDLT refund claim on this basis, the sensible next steps are:

• Obtain the full purchase file, including the contract, transfer, completion statement and SDLT filing position.
• Gather contemporaneous evidence of condition at completion, such as survey reports, auction particulars, photographs, engineer reports and contractor evidence.
• Focus on the exact condition at the effective date, not just the works later carried out.
• Ask whether the evidence shows genuine unsuitability for use as a dwelling, rather than serious but repairable disrepair.
• Review the position against current case law, especially Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
• Consider the risk of HMRC opening an enquiry and challenging the basis of any amendment or repayment claim.
• Take specialist SDLT advice before filing or amending a return, particularly where the argument depends on the “unsuitable for use” test.

Conclusion

Auction buyers often assume that a house needing major structural work must have been “uninhabitable” for SDLT purposes. That is not the legal test. The question is whether, at completion, the building was truly not suitable for use as a dwelling. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, that threshold is now relatively high, so any refund claim needs careful legal and factual analysis.

Legal References Used

• Finance Act 2003
• Finance Act 2003, Schedule 4ZA
• 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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