Can you claim an SDLT refund because a property was uninhabitable?

Introduction

Many buyers ask whether they can recover Stamp Duty Land Tax (SDLT) if the property they bought was in very poor condition. This usually comes up where the building was unmortgageable, needed major works, or looked unfit to live in at the time of purchase.

The key legal question is not whether the property was run-down or expensive to repair. It is whether, on the effective date of the transaction, it was suitable for use as a dwelling for SDLT purposes. That is a strict test, and 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 residential property through a company, paid SDLT at the higher residential rate, and then considered whether a refund might be available because the property was said to be uninhabitable. The buyer had a survey report and wanted to know whether the condition of the property was serious enough to support an SDLT reclaim.

Nick’s Explanation

Nick’s view was cautious. After reviewing the general position and the survey material, he did not think the property met the threshold for HMRC to accept an uninhabitable property claim.

In anonymised terms, his explanation was:

“I have gone through the survey and I do not think this property meets the threshold for HMRC to pay such a claim.”

He also warned that HMRC take a firm approach to weak or incorrect claims. In substance, his point was that a buyer should only proceed if the facts genuinely show that the property was not suitable for use as a dwelling at the relevant date.

The Law

SDLT is charged under the Finance Act 2003. Whether property is taxed as residential or non-residential depends on the statutory definition of “residential property”.

Under section 116 Finance Act 2003, land is residential property if it consists of or includes:

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

For many uninhabitable property cases, the dispute is over the phrase “suitable for use as a dwelling”. If the building was not suitable for use as a dwelling at completion, the transaction may fall outside the residential rates and into the non-residential regime instead. If SDLT was originally paid on the residential basis, that can create scope for an amendment or reclaim, subject to the time limits and procedural rules.

The courts have repeatedly said that this is an objective test. The issue is the physical condition of the property at the effective date of the transaction, not the buyer’s plans, the price paid, or the fact that a lender would not lend on it.

The modern authorities include decisions such as P N Bewley Ltd v HMRC [2019] UKFTT 65 (TC), later appellate decisions on the meaning of suitability, and now the Court of Appeal decision in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Following Mudan, the threshold for showing that a building was not suitable for use as a dwelling is relatively high.

Analysis

When looking at whether an SDLT refund is possible in this kind of case, the analysis usually works in the following order.

First, identify what was bought on the effective date of the transaction. The condition of the building must be assessed as it stood at completion, not after strip-out works or later deterioration.

Second, ask whether the building retained the basic character of a dwelling. A property can still be a dwelling even if it is old, neglected, damp, missing some fittings, in need of rewiring, or not currently attractive to occupy.

Third, focus on whether the defects were so serious that the building was not suitable for use as a dwelling at all. This is where many claims fail. Serious disrepair is not enough by itself. A building may still be suitable for use as a dwelling even if it needs substantial renovation.

Fourth, consider the evidence. A survey report can help, but its wording matters. Reports often describe a property as “unmortgageable”, “in poor condition”, or requiring “significant works”. Those descriptions do not automatically prove that the property was unsuitable for use as a dwelling for SDLT purposes. The legal test is narrower and more demanding.

Fifth, distinguish between:

• property that is difficult, unsafe, or inconvenient to live in without repairs, and
• property that has crossed the legal line and is not suitable for use as a dwelling at all.

Examples that may support an argument in stronger cases include the absence of essential facilities or defects so fundamental that normal residential occupation was not realistically possible. Even then, the courts now expect careful evidence tied to the precise legal test.

In the scenario described, the fact that the property was bought for cash and was unmortgageable does not settle the issue. Nor does the fact that higher residential SDLT was paid by a company. Those facts may explain why the question arises, but they do not prove that the property fell outside the residential definition.

Nick’s conclusion suggests that, having reviewed the survey, the defects did not appear severe enough to meet the current legal threshold. That is consistent with the post-Mudan position. A claim based only on substantial disrepair, lender concerns, or refurbishment needs is now much less likely to succeed unless the evidence shows a truly fundamental loss of residential suitability.

Outcome

The practical conclusion is that not every run-down or unmortgageable house qualifies for an SDLT refund. If the building was still objectively suitable for use as a dwelling on completion, SDLT remains chargeable on the residential basis, including the higher rates where applicable.

On the facts described here, the better view was that the property did not meet the threshold for an uninhabitable property claim.

Practical Steps

If you are assessing a possible SDLT reclaim on this ground, the sensible next steps are:

• obtain and review the survey report, photographs, and any contemporaneous evidence showing the condition at completion;
• identify the exact physical defects that existed on the effective date of the transaction;
• separate issues of value, mortgageability, and refurbishment cost from the legal question of suitability for use as a dwelling;
• check whether the building had the essential characteristics of a dwelling at completion;
• compare the facts carefully against the higher threshold now reflected in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799;
• consider whether any amendment or reclaim would still be within the relevant SDLT time limits.

If the evidence shows only serious disrepair rather than a complete failure of residential suitability, a reclaim is unlikely to succeed.

Conclusion

A property does not become non-residential for SDLT just because it is in poor condition or cannot be mortgaged. The test is whether it was suitable for use as a dwelling at the date of purchase. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, that threshold is relatively high, and many “uninhabitable” claims will fail unless the defects were truly fundamental.

Legal References Used

• Finance Act 2003, section 116
• P N Bewley Ltd v HMRC [2019] UKFTT 65 (TC)
• 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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