Claims that Stamp Duty Land Tax (SDLT) does not apply, or applies at a reduced rate, to “uninhabitable” properties have attracted increasing attention online, including on social media. This interest is largely driven by the potentially significant tax savings involved.
Depending on the circumstances, the issue may affect whether SDLT is charged at residential or non-residential rates. It may also determine whether the higher rates for additional residential properties apply. In some cases, this can allow recovery of the higher-rate surcharge where another property is not treated as a dwelling at the date of completion of a transaction, which is the effective date for SDLT purposes.
Section 116 of the Finance Act 2003 defines residential property by reference to whether a building is used as a dwelling, suitable for use as a dwelling, or in the process of being constructed or adapted for such use. Where a property is not in residential use, the critical question is whether it was suitable for use as a dwelling.
This issue has recently been considered by the Court of Appeal in Amarjeet and Tajinder Mudan v HMRC [2025] EWCA Civ 799, a significant judgment which clarifies the correct legal approach to assessing whether a property is suitable for use as a dwelling for SDLT purposes. The Court reaffirmed that suitability for use as a dwelling is assessed by a strict, multi-factor test. A property may remain residential for SDLT purposes even if it requires substantial works. Poor physical condition, lack of utilities or heating, or flooding do not determine SDLT treatment, and immediate liveability is not the test. The correct approach is an overall assessment of whether the property retains its fundamental residential character, and the decision confirms that the threshold for falling outside the residential SDLT regime is a very high one.
In practice, these cases often raise wider questions, including whether council tax treatment, Valuation Office Agency classification, planning restrictions or legal prohibitions on occupation are relevant. While such factors may form part of the assessment, many aspects of how they interact with SDLT remain untested.