Uninhabitable Property SDLT Refunds After Mudan v HMRC
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Can an uninhabitable property qualify for non-residential SDLT rates?
Introduction
Many buyers ask whether a run-down or unsafe property should be treated as non-residential for Stamp Duty Land Tax (SDLT) purposes. The reason is simple: if a building is not “suitable for use as a dwelling” on the effective date of the transaction, the residential SDLT rules may not apply.
This issue has become much harder after recent case law. The courts have now made clear that poor condition, disrepair, or the need for major works will not usually be enough on their own. 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.
The Question
A buyer purchased a property in very poor condition and believed it was uninhabitable at completion. The buyer wanted to know whether that meant the property should be treated as non-residential for SDLT, whether a reclaim could still be made, and whether HMRC might revisit claims that had already been paid in similar cases.
Nick’s Explanation
Nick’s core explanation was that the legal position on “uninhabitable property” claims has tightened significantly. In anonymised form, his view was:
“Before the later appellate decisions, some buyers had arguable grounds where a property was dangerous to live in and needed more than ordinary repair. The position is now stricter. The question is not simply whether the property was unpleasant or unsafe to occupy immediately, but whether it was truly unsuitable for use as a dwelling in a more fundamental sense.”
He also explained that claims based only on disrepair are now much more likely to fail, and that HMRC is likely to resist them. He noted that where a property can still be repaired and reused as a home, the courts are unlikely to treat it as non-residential merely because substantial works are needed.
On previously paid claims, Nick’s explanation was more practical. He said that HMRC may be more interested in open or recent matters than in reopening every historic repayment, particularly where the legal landscape was less settled when the claim was made. But that does not mean all paid claims are immune from challenge. The risk depends on timing, the amount repaid, and HMRC’s enquiry powers.
The Law
SDLT is charged under the Finance Act 2003. Whether residential or non-residential rates apply depends on the subject matter of the land transaction at the effective date, usually completion.
The key statutory provisions are in section 116 Finance Act 2003. Broadly:
- “Residential property” includes 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.
- If property is not residential, it may fall to be taxed at non-residential or mixed rates.
The difficult question in these cases is the meaning of “suitable for use as a dwelling”. That phrase has been considered in a line of cases, including Fiander and Brower v HMRC and, more recently, the Mudan litigation.
The modern approach is that suitability is judged objectively by looking at the property’s physical character at the effective date. The test is not simply whether a person would sensibly move in that evening, or whether the property meets every modern standard of comfort. A dwelling may still be “suitable for use” even if it is in poor repair and needs extensive works.
Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold is now relatively high. A property will not usually cease to be residential merely because it lacks modern convenience, needs rewiring, has plumbing defects, has damp, or requires substantial renovation. The courts have indicated that the focus is on the property’s essential character as a dwelling. Cases are strongest only where the building lacks the basic nature of a dwelling or is so far gone that demolition or complete replacement is realistically required.
Analysis
The practical analysis usually works in the following steps.
Identify the effective date of the transaction
The condition of the property is assessed at the effective date, usually completion. Later works, later surveys, or later deterioration are much less important unless they show what the condition was at that date.
Ask whether the building still had the character of a dwelling
If it remained recognisable as a house or flat capable of being repaired and brought back into use, that points strongly toward residential status.
Separate disrepair from fundamental unsuitability
Major defects do not automatically make a property non-residential. Rewiring, failed plumbing, roof problems, heating issues, water damage, unsafe interiors, and lack of immediate habitability may still be treated as repair issues rather than loss of dwelling status.
Consider whether demolition was effectively required
This is where the strongest non-residential arguments tend to arise. If the property could not realistically be reused as a dwelling and had to be demolished, the case is much stronger.
Review the evidence available at completion
Useful evidence may include survey reports, engineer reports, photographs, contractor assessments, asbestos reports, utility disconnection evidence, and documents showing the building could not practically be occupied or restored without fundamental reconstruction.
Check whether a claim is still in time
Amendment and reclaim time limits matter. A buyer considering a fresh SDLT reclaim must check the statutory deadline carefully.
Assess HMRC challenge risk
Even where a claim is arguable, HMRC may enquire into it. After Mudan, claims based on ordinary or even severe disrepair face a much greater risk of rejection.
On the question of historic paid claims, the position is not that HMRC will automatically reclaim every repayment. But if HMRC is still within its enquiry or assessment window, it may review a case. The likelihood of challenge may be higher where the repayment was substantial or the factual basis for the claim was weak. The fact that the law has become clearer does not itself decide every historic case, but it does strengthen HMRC’s position in ongoing disputes.
Outcome
The main practical conclusion is that an “uninhabitable property” argument is now much harder to run successfully for SDLT purposes. After Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold is relatively high.
If the property was still fundamentally a dwelling and could be repaired, even at significant cost, it will usually remain residential property for SDLT. A buyer is more likely to succeed only where the building lacked the essential nature of a dwelling or could not realistically be reused without demolition or equivalent reconstruction.
For paid claims, HMRC may review some cases, but not every historic repayment will necessarily be reopened. Much depends on the procedural position and the facts.
Practical Steps
Gather contemporaneous evidence
Collect surveys, photographs, quotations, structural reports, and any documents showing the condition at completion.
Focus on fundamental condition, not just poor repair
Ask whether the evidence shows more than disrepair. The key issue is whether the property truly ceased to be suitable for use as a dwelling in the legal sense.
Check the filing and amendment deadlines
Time limits can determine whether a claim is still possible at all.
Review any repayment already received
If a refund has already been paid, check when the claim was made, when the repayment was issued, and whether HMRC still has an open enquiry window or other route to challenge it.
Compare the facts against the current case law
If the case is really about a derelict but repairable house, the prospects are now likely to be poor. If the evidence shows demolition was effectively necessary, the argument may still be stronger.
Keep all correspondence and records
If HMRC raises questions later, the quality of the original evidence and reasoning will matter.
Conclusion
Not every unsafe, damaged, or empty home is non-residential for SDLT. The courts now take a stricter view. 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, and ordinary disrepair, even serious disrepair, will often not be enough.
Legal References Used
- Finance Act 2003, especially section 116
- Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799
- Fiander and Brower v HMRC
- Relevant SDLT case law on the meaning of “suitable for use as a dwelling”
This page was last updated on 22 March 2026.
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