Can you get an SDLT refund if a property was uninhabitable at purchase?

Introduction

Many buyers ask whether they can reclaim Stamp Duty Land Tax (SDLT) where the property they bought was in very poor condition. The key issue is whether the building was still a dwelling for SDLT purposes at the effective date of the transaction, or whether its condition was so severe that it had ceased to be suitable for use as a dwelling.

This question matters because some buyers hope to amend their SDLT return and argue that the purchase should have been treated as non-residential or mixed-use rather than residential. In practice, that argument is difficult. The courts have made clear that the threshold is now relatively high, especially following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

A buyer purchased a house and later considered claiming an SDLT refund on the basis that the property was uninhabitable when bought. The buyer had survey evidence and photographs showing major disrepair and wanted to know whether the condition of the property was enough to support a reclaim on the basis that it was not suitable for use as a dwelling.

Nick’s Explanation

Nick’s view was that, even after reviewing the survey, photographs and the Court of Appeal decision in Mudan, the claim was not one he would support.

His reasoning was that the building still appeared to be “a house that needs heavy renovation rather than a truly derelict building that has lost its residential character”. In other words, serious disrepair is not enough by itself. A property can be in poor condition, require extensive works and still remain residential property for SDLT purposes.

He also explained the practical risk of making a reclaim:

• if HMRC issue a refund, they may still open an enquiry within the normal enquiry window after the amended return is filed;
• HMRC are likely to ask for detailed further evidence during that enquiry; and
• if HMRC ultimately reject the position, they may seek repayment of the tax plus interest.

Nick’s overall view was that this was not a strong case for arguing that the property had ceased to be a dwelling.

The Law

SDLT is charged under the Finance Act 2003. Whether residential rates apply depends on whether the subject matter of the transaction includes a “dwelling”.

The main statutory provisions are in Schedule 4ZA to the Finance Act 2003 and the wider SDLT code, read together with the case law on what counts as a dwelling and when a building is suitable for use as one.

For these purposes, the condition of the property is tested at the effective date of the transaction, usually completion. The question is not whether the buyer intended to renovate it, nor whether a lender would lend on it, nor whether it was pleasant or economical to occupy. The question is whether, viewed realistically, it was still suitable for use as a dwelling at that date.

The courts have repeatedly drawn a distinction between:

• a building that is run down, damaged, stripped out or in need of major works; and
• a building that is so far gone that it has lost its character as a dwelling.

Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold for showing that a property was not suitable for use as a dwelling is relatively high. A property is not treated as non-residential merely because it is difficult to live in, requires extensive renovation, lacks modern facilities, or would need substantial expenditure before occupation.

Analysis

The analysis usually works in four steps.

First, identify what was bought at completion. If the property was physically a house or flat and still retained the basic character of residential accommodation, that points strongly towards residential treatment.

Second, examine the actual condition on the effective date. Relevant evidence may include a survey, photographs, contractor reports and completion documents. But the evidence must show more than disrepair. Missing kitchens, damaged bathrooms, defective heating, damp, unsafe electrics, water ingress or general neglect do not automatically mean the building has ceased to be a dwelling.

Third, ask whether the defects were so fundamental that the building was no longer suitable for use as a dwelling at all. That is a much stricter test. The courts now expect something closer to genuine dereliction or loss of residential character, not simply a property that no reasonable buyer would occupy without works.

Fourth, consider the litigation and enquiry risk. Even if a reclaim is submitted and initially accepted, HMRC may later investigate. If the evidence only shows a poor-condition house needing refurbishment, HMRC are likely to argue that residential rates were correctly applied from the outset.

On the facts described here, the property was viewed as a house needing heavy renovation rather than a building that had ceased to be residential. That is exactly the type of case that is now difficult after Mudan. The courts have raised the bar. An “uninhabitable” label used in everyday language is not enough. For SDLT, the legal question is narrower and more demanding.

Outcome

The practical conclusion is that a refund claim based on the property being uninhabitable is unlikely to succeed where the building still looks and functions, in legal terms, as a house in poor condition. If the property merely required substantial renovation, the safer view is usually that residential SDLT treatment still applied.

In short, a buyer should not assume that severe disrepair creates a valid non-residential SDLT reclaim. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition threshold is relatively high.

Practical Steps

If you are assessing a possible reclaim, the sensible next steps are:

• review the SDLT return and identify exactly how the transaction was originally reported;
• gather contemporaneous evidence from the completion date, including surveys, photographs, mortgage valuation material, contractor reports and conveyancing papers;
• separate evidence of serious disrepair from evidence that the building had genuinely lost its residential character;
• compare the facts carefully with the reasoning in Mudan and related SDLT dwelling cases;
• consider the time limit for amending the return or making any repayment claim; and
• factor in the risk that HMRC may enquire into any amendment and seek repayment with interest if the claim fails.

Where the evidence shows only that the property was dilapidated or required major refurbishment, a reclaim should be approached with caution.

Conclusion

A property is not treated as non-residential for SDLT simply because it was in very bad condition when bought. The legal test is whether it had ceased to be suitable for use as a dwelling at the effective date. That is now a high threshold, and a house needing heavy renovation will often still count as residential property.

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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