Uninhabitable Property SDLT Reclaims after Mudan v HMRC
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Can you recover fees after an uninhabitable property SDLT claim fails?
Introduction
Many buyers were advised to claim back Stamp Duty Land Tax on the basis that a dwelling was not suitable for use as a residence at the effective date of the transaction. In some cases, HMRC later challenged those claims, or the taxpayer repaid the refund after the legal position became clearer. A common follow-up question is whether fees paid to a claims firm or adviser can be recovered when the refund no longer stands.
This issue usually involves two separate questions. First, was the original SDLT reclaim legally sound? Second, if the reclaim has failed and the taxpayer has had to repay HMRC, what rights does the taxpayer have against the adviser or claims business that charged the fee?
The Question
A homeowner paid a substantial fee to a private SDLT reclaim business after being told there was a valid claim on the basis that the property was uninhabitable. The reclaim was later unwound and the SDLT benefit was repaid to HMRC. The business then accepted that its fee should be refunded, but said it could only repay part of the money immediately and could not give a firm date for the balance.
The practical question is: where an uninhabitable property SDLT claim has failed and the adviser accepts that fees should be returned, what should the taxpayer understand about the underlying SDLT law and the refund position?
Nick’s Explanation
Nick’s explanation can be summarised in two parts.
First, the underlying SDLT point. A claim that a dwelling was not suitable for use as a residence is now much harder to sustain than many people were previously told. The Court of Appeal in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799 makes clear that the threshold is relatively high. Serious disrepair or the need for works does not automatically mean a property is unsuitable for use as a dwelling for SDLT purposes.
Secondly, the fee point. If the adviser or reclaim business accepts that its fee should be refunded because the claim has failed, that becomes a debt or repayment issue between the taxpayer and that business. In anonymised form, Nick’s position is that if a business has acknowledged the refund is due, the taxpayer should press for a clear repayment timetable in writing and keep a full record of what has been promised and what has actually been paid.
Nick’s reasoning, put simply, is that the taxpayer should separate the tax analysis from the repayment dispute. The SDLT reclaim may have failed because the legal test was not met. Once that has happened, any agreement to return fees should be documented clearly, including the amount due, any instalments, and whether interest is being added.
The Law
The relevant SDLT rules are found in the Finance Act 2003. SDLT on residential property depends in part on whether the subject matter acquired is a dwelling. A building may fail to count as a dwelling if, at the effective date of the transaction, it is not suitable for use as a dwelling.
The statutory framework includes:
- Finance Act 2003, especially the provisions dealing with residential property and the meaning of a dwelling
- Schedule 4ZA to the Finance Act 2003, where relevant to higher rates and the concept of a dwelling
- HMRC guidance and manuals on when property is suitable for use as a dwelling
The case law has developed significantly. Earlier arguments often focused on physical defects, missing facilities, or the cost of repairs. However, the courts have increasingly emphasised that the test is an objective one applied at the effective date of the transaction, and that the bar for unsuitability is not low.
In an uninhabitable or not suitable for use case, the condition thresholds are now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That authority reinforces that a property can still be a dwelling for SDLT purposes even if it is in poor condition, requires renovation, or is not immediately attractive or convenient to occupy.
Analysis
There are four steps to analyse this kind of situation.
Identify what happened with HMRC.
If the taxpayer has already repaid the SDLT refund, or if HMRC has successfully challenged the claim, that usually means the practical tax benefit has gone. The reclaim has not succeeded in the end, whatever may originally have been argued.
Assess the strength of the original uninhabitable argument.
The key question is whether the property was objectively unsuitable for use as a dwelling at the effective date. Following Mudan, this is a demanding test. Missing items, dated condition, water damage, damp, defective kitchens or bathrooms, or a need for refurbishment may not be enough on their own. The courts look at whether the building still retained the character of a dwelling and whether the defects truly prevented residential use.
Separate the SDLT issue from the fee issue.
Even if the SDLT claim fails, the next question is whether the adviser is obliged to refund its fees. That depends on the contract, the representations made, and any later agreement to repay. If the business has expressly accepted that the fee should be returned, the dispute is no longer mainly about SDLT law. It becomes a question of enforcing repayment of money due.
Look at what has been admitted and paid.
If the business has admitted that a refund is due and has made only a partial payment, the outstanding balance remains important. A taxpayer should check whether there is written confirmation of the total fee, the amount repaid, the balance outstanding, and any promise about timing or interest.
On the facts described, the most important legal background is that the uninhabitable argument itself is now much narrower than many reclaim businesses once suggested. If the claim has already been reversed, the reader should assume that the original SDLT position is at best doubtful unless it falls within the stricter approach confirmed by the higher courts.
Outcome
The practical conclusion is this: a failed uninhabitable property SDLT reclaim does not automatically answer the separate question of fees, but it usually means the taxpayer should focus less on reviving the tax argument and more on recovering any money that the adviser has agreed to refund.
Where a repayment business has acknowledged that fees should be returned, the taxpayer should treat the outstanding amount as a debt recovery issue. The taxpayer should also be realistic about the underlying SDLT law: after 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.
Practical Steps
Gather the paperwork.
Keep the engagement terms, invoices, proof of payment, HMRC correspondence, and all emails about the refund.
Confirm the figures.
Write down the original fee paid, any part refunded, and the balance still outstanding.
Ask for a written repayment schedule.
If the business says it will repay in instalments, ask for dates and amounts in writing.
Check whether interest has actually been agreed.
If the business says interest will be included, ask for the rate, start date, and calculation basis in writing.
Review the original SDLT advice critically.
If the reclaim was based on the property being uninhabitable, compare the facts carefully against the stricter legal test now confirmed by the courts.
Consider formal recovery action if needed.
If repayment is admitted but not made, the next step may be a formal written demand and, if necessary, a county court claim for the unpaid balance.
Conclusion
If an SDLT reclaim based on a property being uninhabitable has failed, the tax position is now difficult to reopen unless the facts meet a high threshold. The more immediate issue is usually recovery of fees from the adviser or reclaim business. Where that business has accepted that a refund is due, the taxpayer should press for a clear written timetable and preserve all evidence of the amount still owed.
Legal References Used
- Finance Act 2003
- Schedule 4ZA Finance Act 2003
- Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799
- HMRC guidance on when a property is suitable for use as a dwelling for SDLT purposes
This page was last updated on 22 March 2026.
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