SDLT on dilapidated properties

The rate of SDLT payable on the purchase of a property depends on whether it is a residential property or not, and if so, whether the supplement applies. As SDLT payable on residential properties can be significantly higher than on non-residential properties, it can be tempting to claim that a property is not a residential property because it is not habitable. However, following the decision of the Court of Appeal in Amarjeet and Tajinder Mudan v HMRC [2025] EWCA Civ 799, HMRC issued a press release warning agents against making refund claims on this basis as most will fail. The case highlights the need to understand when a property counts as a residential property for SDLT purposes.

The decision

In Amarjeet and Tajinder Mudan v HMRC [2025] EWCA Civ 799, the claimants paid SDLT initially at the residential rates but their tax agent submitted a refund claim on their behalf as the property was in a poor state of repair and, as such, the agent advised that it would not count as a residential property. The point at issue was the definition of a residential property for SDLT purposes and whether the requirement that, for a property to be a residential property meant that it must be ‘suitable for use as a dwelling’ meant that the purchaser should be able to move in straight away.

The Court of Appeal rejected the claimant’s appeal, agreeing with the findings of the Upper Tribunal, finding that the fact that, while the property needed some repairs, this did not prevent it from being a residential property. Consequently, SDLT was due at the residential rates.

More specifically, the Court of Appeal upheld the findings of the Upper Tribunal that:

·       being suitable for use as a dwelling does not mean that the property must be ready for immediate occupation;

·       it is important to assess the extent to which the property has the fundamental characteristics of a dwelling and whether it is structurally sound;

·       if the property has previously been used as a dwelling, this will be relevant in determining whether it is suitable for use as a dwelling; and

·       consideration of whether the defects result in the property no longer having the characteristics of a dwelling is key.

Uninhabitable dwellings

HMRC warn that only a small minority of properties will have deteriorated or been damaged to such an extent that they no longer comprise a dwelling and it will be a question of fact as to whether this is the case. HMRC pursue refund claims made on the basis that a property is uninhabitable and have a high rate of success, and anyone thinking of making such a claim should proceed with caution.

It should be noted that even significant renovations or repairs, such as the temporary removal of bathrooms or kitchens, substantial repairs to walls, doors, windows or roofs, damp proofing, rectifying flood damage or structural repairs, rewiring or replacing a boiler or pipework will not prevent a building from being ‘suitable for use as a dwelling’. Consequently, SDLT remains payable at the residential rates.

Partner note: Amarjeet and Tajinder Mudan v HMRC [2025] EWCA Civ 799; HMRC’s Stamp Duty Land Tax Manual at SDLTM00385

Disclaimer

This article is not intended to be tax advice. Each person's tax circumstances are different; therefore, we recommend that you contact us for personalized tax advice. Sam Niranjan & Co., or Sivasambu Candesamy Niranjan, will not accept any responsibility whatsoever if you make any loss as a result of relying on this article.