Can you still claim the lower SDLT rate because a property was uninhabitable?

Introduction

Buyers often ask whether they can avoid the residential rates of Stamp Duty Land Tax (SDLT) if a property was in very poor condition when they bought it. This usually comes up where the dwelling had serious defects, needed major works, or could not sensibly be lived in straight away.

The key issue is whether the property was genuinely “unsuitable for use as a dwelling” at the effective date of the transaction. That test has become significantly harder to satisfy. In particular, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

The Question

The question can be put in general terms like this: if a buyer purchased a residential property in very poor condition, can they argue that it was not suitable for use as a dwelling on completion and therefore should not be taxed as residential property for SDLT purposes?

Nick’s Explanation

Nick’s explanation was that the answer depends on the condition of the property at the effective date of the purchase, not on whether the buyer intended to renovate it or whether substantial works were later carried out.

In anonymised form, the key point was that a property does not fall outside the residential rules just because it is dated, defective, or expensive to repair. The question is whether, viewed realistically at completion, it had crossed the line from being a damaged or run-down home into being truly unsuitable for use as a dwelling.

Nick’s reasoning can be summarised this way:

• the legal test is strict and fact-sensitive;
• many properties needing major refurbishment are still treated as residential for SDLT;
• the courts now set a relatively high bar for proving unsuitability for use as a dwelling;
• evidence about the exact state of the property at completion is critical.

The Law

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

The main provisions are in Schedule 4ZA to the Finance Act 2003 and the wider SDLT code governing what counts as residential property. Broadly, property is residential if it consists of:

• a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use; or
• land that forms part of the garden or grounds of such a building.

Where a building is not suitable for use as a dwelling at the effective date, there may be scope to argue that the purchase should not be treated as wholly residential. But this is not a loose or impressionistic test. It is a legal test applied to the physical state of the property at the relevant time.

The courts have considered the meaning of “suitable for use as a dwelling” in a line of cases. The recent and important authority is Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, which confirms that the threshold is relatively high in uninhabitable or unsuitable-for-use cases.

Analysis

The analysis usually works in the following steps.

First, identify the relevant date. For SDLT, the condition of the property is tested at the effective date of the transaction, usually completion. Later refurbishment, later occupation, or later survey evidence is only useful if it helps prove the condition on that date.

Second, focus on the building itself. The question is not whether the buyer wanted to modernise it, whether a lender would have been cautious, or whether the works budget was substantial. Many properties are bought in poor condition and still remain residential for SDLT.

Third, ask whether the defects meant the property was actually unsuitable for use as a dwelling. This is a higher threshold than disrepair. Relevant issues may include whether the property lacked basic facilities, had severe structural failure, was dangerous to occupy, or had such serious defects that normal residential occupation was not realistically possible.

Fourth, distinguish between these two situations:

• a property that is unpleasant, outdated, dilapidated, or in need of major renovation; and
• a property that has crossed the line into being unsuitable for use as a dwelling.

Only the second category may support a non-residential SDLT argument.

Fifth, consider the effect of Mudan. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the courts have confirmed that the condition threshold is now relatively high. In practice, that means a buyer must show more than serious disrepair or a need for extensive works. The property must be in a state that genuinely prevents it from being suitable for use as a dwelling at completion.

Sixth, review the evidence. Useful evidence may include:

• a survey or expert report describing the condition at completion;
• completion-day photographs and videos;
• contract papers, replies to enquiries, and valuation material;
• evidence that key services or facilities were absent or unusable;
• invoices and reports showing the nature of immediate remedial works, where they help prove the prior condition.

Finally, weigh the facts against the legal threshold. If the property still had the basic character of a dwelling, even if in very bad shape, HMRC is likely to argue that the residential rates applied. If, however, the defects were so severe that the building was not suitable for use as a dwelling at all, there may be a basis for a claim or amendment, subject to the evidence and time limits.

Outcome

The practical conclusion is that these claims are now difficult. A buyer cannot rely simply on the fact that the property was run-down, unmortgageable, stripped out, or required extensive renovation. The legal test is stricter than that.

In an uninhabitable or not suitable for use case, the condition threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. A successful argument usually requires clear evidence that, at completion, the property was not merely defective but genuinely unsuitable for use as a dwelling.

Practical Steps

If you are assessing this issue, the sensible next steps are:

1. Identify the SDLT effective date, usually the completion date.
2. Gather all evidence showing the property’s exact condition on that date.
3. Separate evidence of disrepair from evidence showing genuine unsuitability for use as a dwelling.
4. Check whether the building retained basic residential facilities and whether occupation was realistically possible.
5. Review the position in light of Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
6. Consider whether any SDLT amendment or refund claim is still within the relevant time limit.
7. Obtain specialist tax advice before making or pursuing a claim, because HMRC is likely to scrutinise these cases closely.

Conclusion

A property does not stop being residential for SDLT just because it is in very poor condition. The real question is whether it was unsuitable for use as a dwelling at completion, and that is now a relatively demanding test. After Mudan, only the more serious cases are likely to succeed.

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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