Can you claim an SDLT refund if a property was uninhabitable when you bought it?

Introduction

Many buyers ask whether they can reclaim Stamp Duty Land Tax (SDLT) if a property was in very poor condition when purchased. The usual argument is that the building was not suitable for use as a dwelling at the effective date of the transaction, so it should have been taxed at non-residential rates instead of residential rates.

This issue matters because the difference in SDLT can be substantial, especially where the higher rates for additional dwellings were paid. However, the legal test is strict, and recent case law has made clear that the threshold for showing a property was not suitable for use as a dwelling is now relatively high.

The Question

A buyer purchased two residential properties in England on separate dates. In each case, the buyer believed the property was in such poor condition at completion that it could not be lived in without major refurbishment works. The buyer wanted to know whether that condition might justify an SDLT refund on the basis that the properties should have been treated as non-residential at purchase.

Nick’s Explanation

Nick’s view was that, on balance, HMRC would be likely to reject a claim that either property was uninhabitable for SDLT purposes.

In anonymised form, his reasoning was essentially this: where a property is truly unsuitable for use as a dwelling at the effective date of the transaction, it may be taxed at non-residential rates. But poor condition, disrepair, or the need for full refurbishment does not automatically meet that test. The position depends on the detailed facts and the legal threshold is demanding.

Nick also pointed out that SDLT is a self-assessed tax. That means a taxpayer can choose to amend a return or make a reclaim if they consider the original treatment was wrong, but they should do so only after understanding the legal test and the risk that HMRC may refuse the claim.

The Law

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

For these purposes, a building is generally treated 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. If a building is not suitable for use as a dwelling at the relevant date, the transaction may instead fall to be taxed at non-residential or mixed rates, depending on the facts.

The central question in many refund claims is therefore whether the property was “suitable for use as a dwelling” on completion. This is an objective test. It is not enough that the buyer intended to carry out extensive works, or that the property was old, neglected, or undesirable. The issue is whether, viewed realistically and objectively, the building had crossed the line from poor residential condition into being unsuitable for use as a dwelling.

The courts have repeatedly emphasised that this is a fact-sensitive question, but the modern approach is strict. In particular, in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the Court of Appeal confirmed that the condition threshold in these cases is relatively high. A property does not become non-residential simply because it needs repair, modernisation, replacement services, or substantial refurbishment. The defect or defects must be serious enough that the property is not suitable for use as a dwelling at the effective date.

Analysis

When assessing whether a refund claim is realistic, it helps to work through the issue in stages.

First, identify the condition of the property at the effective date of the transaction, usually completion. The legal test is applied at that date, not by reference to later works or later survey findings unless they prove the earlier condition.

Second, separate disrepair from true unsuitability. A property may be dated, neglected, dirty, structurally worn, or in need of complete refurbishment and still remain suitable for use as a dwelling. The fact that a buyer would not choose to live there, or that a lender or insurer raised concerns, does not by itself decide the SDLT position.

Third, look for defects that go to basic habitability in a real and substantial way. Examples sometimes argued in these cases include the absence of a functioning kitchen or bathroom, serious structural instability, lack of essential services, major contamination, or other defects making occupation unrealistic. Even then, the court will look closely at whether the problem truly prevented use as a dwelling, or merely meant the property was uncomfortable, unsafe in some respects, or in need of works.

Fourth, consider the evidential burden. A successful claim usually requires strong contemporaneous evidence, such as survey reports, photographs, contractor reports, completion-day records, utility evidence, and any other material showing the actual state of the building at the relevant date. General descriptions such as “uninhabitable”, “derelict”, or “needed full refurbishment” are rarely enough on their own.

Applying that approach to the scenario described here, the fact that both properties required significant works and full refurbishment does not necessarily mean they were unsuitable for use as dwellings in law. Probate properties and run-down houses are often still treated as residential for SDLT purposes. If the buildings retained the basic character and functionality of dwellings, HMRC would be likely to resist any reclaim.

That is why Nick’s overall view was cautious. On the information available, the better view was that HMRC would probably reject the argument that the properties fell outside the residential regime.

Outcome

The practical conclusion is that a claim for an SDLT refund in this type of case is often difficult unless there is strong evidence that the property was genuinely unsuitable for use as a dwelling on completion.

Where the facts show only serious disrepair, outdated condition, or a need for major renovation, HMRC is likely to maintain that residential SDLT rates were correctly applied. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold for proving unsuitability is now relatively high.

Practical Steps

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

• Obtain all contemporaneous evidence from the time of purchase, including surveys, photos, videos, contractor comments, mortgage valuation material, and completion documents.
• Focus on the exact condition at completion, not the scale of later refurbishment.
• Identify whether there were defects affecting basic residential use, rather than defects showing only neglect or poor condition.
• Compare the facts carefully with recent case law, especially Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
• Check time limits for amending the SDLT return or making any repayment claim.
• Take specialist tax advice before submitting a reclaim, because an unsuccessful claim may lead to delay, dispute, and scrutiny from HMRC.

Conclusion

A property does not qualify for non-residential SDLT treatment merely because it was in very poor condition or needed complete refurbishment. The question is whether it was objectively unsuitable for use as a dwelling at the effective date of the transaction. That is now a demanding test, and many “uninhabitable” claims fail because the property was still, in law, a dwelling despite its condition.

Legal References Used

• Finance Act 2003
• 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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