Can you reclaim SDLT if a property is not suitable for use as a dwelling at completion?

Introduction

Buyers sometimes ask whether Stamp Duty Land Tax (SDLT) can be reduced or reclaimed where a residential property is in very poor condition at the date of purchase. The issue usually arises where the property has major defects, cannot be mortgaged, or needs extensive works before anyone can live there safely.

The key point is that SDLT is assessed by reference to the property’s condition at the effective date of the transaction, usually completion. But the legal test is stricter than many buyers expect. A property does not fall outside the dwelling rules just because it is run down, requires refurbishment, or is unmortgageable.

That matters even more now because the threshold for saying a property is not suitable for use as a dwelling is relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A buyer was purchasing a property through a company for £115,000 and expected SDLT to be paid on completion. The buyer believed the property might not be suitable for use as a dwelling because a survey reported serious problems, including:

• heating and hot water systems not operating;
• kitchen and bathroom facilities said not to be fit for normal domestic use;
• old electrical installation likely to require a full rewire;
• significant damp and structural concerns;
• a rear extension said to be structurally unstable and recommended for demolition and rebuild; and
• finance being obtained by bridging loan rather than a standard mortgage.

The buyer wanted to know whether SDLT still had to be paid at completion and, if so, whether there might later be grounds to reclaim it.

Nick’s Explanation

Nick’s core point was that the buyer needed to focus on the correct SDLT self-assessment and to understand the effect of the Mudan decision. In anonymised form, his response was essentially:

“If you believe the property is not suitable for use as a dwelling, that must be assessed carefully at completion. The important point is to understand the Mudan v HMRC decision and make the correct SDLT self-assessment in line with the Finance Act 2003.”

That is a sound summary of the real issue. The question is not whether the property is in bad condition, nor whether major works are needed, but whether, on the completion date, it was truly unsuitable for use as a dwelling under the SDLT rules as interpreted by the courts.

The Law

SDLT is charged under the Finance Act 2003. For these purposes, the main question is whether the subject matter acquired is residential property, mixed property, or non-residential property.

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. The legislation is found in Finance Act 2003, section 116.

The phrase “suitable for use as a dwelling” has been considered in a number of cases. The courts have made clear that this is an objective test applied to the physical condition of the property at the effective date of the transaction. The test is not satisfied merely because:

• the property needs renovation;
• parts of it are defective;
• it is inconvenient or expensive to occupy;
• a lender will not offer a normal residential mortgage; or
• a buyer intends to carry out substantial works.

The recent Court of Appeal decision in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 is especially important. It confirms that the threshold for showing a property was not suitable for use as a dwelling is relatively high. Serious disrepair does not automatically take a building outside the dwelling category. The condition must be such that, viewed realistically and objectively at completion, the building is not suitable for use as a dwelling.

Analysis

The practical analysis usually works in stages.

First, SDLT must normally be dealt with at completion. A buyer cannot simply refuse to pay SDLT because the property appears derelict or unsafe. The return must reflect the buyer’s proper legal self-assessment at that date.

Second, the evidence must relate to the property’s actual condition on completion. A surveyor’s report can be important, but what matters is not just a list of defects. The evidence must support the legal conclusion that the building was not suitable for use as a dwelling at all.

Third, many of the defects listed here are serious, but some are not enough by themselves. For example:

• failed boilers or no hot water may point to disrepair, but do not always prevent a building from being a dwelling for SDLT purposes;
• old electrics or the need for rewiring can still amount to a property needing refurbishment rather than a property falling outside the dwelling definition;
• damp, poor EPC rating, and outdated kitchens or bathrooms often indicate substantial renovation, but not necessarily legal unsuitability as a dwelling;
• an inability to obtain a standard mortgage is not the SDLT test.

Fourth, structural instability is more significant. If part of the building is genuinely unsafe, especially where a qualified surveyor recommends demolition and rebuild of a substantial part, that may help support an argument that the property was not suitable for use as a dwelling at completion. But even here, the question remains whether the building as a whole was unsuitable for use as a dwelling, not merely whether it required major works.

Fifth, after Mudan, the courts are likely to scrutinise these claims carefully. A buyer needs to show more than severe disrepair. The evidence should demonstrate that occupation as a dwelling was not realistically possible at completion, not just undesirable, risky without repairs, or inconsistent with modern standards.

Sixth, where a company buys a property for £115,000, the SDLT figure mentioned is consistent with the higher residential rates being applied. If the property was in law still suitable for use as a dwelling, that treatment may well be correct. If it was not suitable for use as a dwelling, the SDLT position could potentially be different, but that depends entirely on a robust legal analysis of the facts and evidence.

Finally, a reclaim is not based on dissatisfaction with the solicitor’s view or on the fact that a survey described the property in strong terms. It depends on whether the SDLT return filed was wrong as a matter of law. That requires careful review of the completion-date evidence.

Outcome

The practical answer is that SDLT usually still has to be addressed and paid on completion in accordance with the buyer’s best legal self-assessment. A later reclaim is only realistic if the property can genuinely be shown to have been not suitable for use as a dwelling at the effective date of the transaction.

On facts like these, there may be an arguable case because of the reported structural instability and recommendation for demolition and rebuild of part of the building. However, the claim is far from automatic. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition threshold is relatively high, and many properties needing extensive repair will still be treated as dwellings for SDLT purposes.

Practical Steps

If you are assessing a similar case, the sensible next steps are:

• obtain and preserve the full survey and any structural engineer’s or surveyor’s letters;
• focus on the property’s physical condition at completion, not on later works;
• identify whether the defects meant the building could not realistically be occupied as a dwelling at all;
• separate evidence of disrepair from evidence of true unsuitability for use as a dwelling;
• review the SDLT return filed and the basis on which it was completed;
• consider whether the evidence is strong enough to support an amended return or reclaim within the relevant time limits.

Useful evidence often includes dated photographs, survey reports, structural assessments, evidence of unsafe conditions, and documents showing that essential parts of the building could not safely be used at completion. But none of that removes the need to apply the legal test correctly.

Conclusion

A property does not escape residential SDLT treatment merely because it is in poor condition or needs major renovation. The real question is whether, at completion, it was objectively not suitable for use as a dwelling. That is now a demanding test, especially after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. In a case involving major structural instability there may be an argument, but any reclaim depends on strong completion-date evidence and a careful application of the Finance Act 2003.

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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