SDLTM00385 - Scope: what is chargeable: land transactions: Residential Property – Not suitable for use as a dwelling
A very high proportion of the SDLT repayment claims that HMRC receives in relation to this area are wrong. There is no tax relief or a lower rate of SDLT for ‘uninhabitable properties’. Customers should be cautious about being misled by repayment agents into making incorrect claims.
Whether a property has deteriorated or been damaged to the extent that it no longer comprises a dwelling is a question of fact. Only a very limited number of properties will genuinely fall under the category of being “not suitable for use as a dwelling”.
Whilst the condition of the building at the time it was acquired is an important factor, there should be a focus on the nature of the building over a period of time. The fact that a building was used as a dwelling in the past is a strong indicator towards it being suitable for use as a dwelling. In addition to this, a significant consideration will be whether a building retains its identity or character as a residential property, despite any disrepair.
A building being “suitable for use as a dwelling” is not the same as being “ready for immediate occupation”. Many properties are purchased in a state of disrepair, and require remedial work, before being fit for occupation. If the building retains the character or identity of a residential property, it will be wholly residential for the purposes of SDLT.
Examples of repairs, renovations and issues that will not make a property unsuitable for use as a dwelling include, but are not limited to:
· The temporary removal of bathroom or kitchen facilities before sale.
· Substantial repairs or replacement is required of windows, floors, doors, or a roof.
· Replacement boiler and pipework.
· Unsafe electrical wiring.
· The need to switch services back on.
· An infestation of pests.
· Damp proofing required or plasterboard damage.
· Flood damage.
· The presence of asbestos.
· Structural defects that can be repaired/rectified.
These are all common issues which can be fixed and do not prevent the building from fundamentally still being a dwelling, even where multiple issues are present.
As demonstrated, the bar on which a property is determined to be unsuitable for use as a dwelling is very high.
Tribunal Decisions
The Court of Appeal has considered suitability for use as a dwelling in the appeal of Amarjeet and Tajinder Mudan [2025] EWCA Civ 799. The decision is now legally binding and sets a precedent in law.
This decision strongly upheld the decision of the Upper Tribunal ([2024] UKUT 307 (TCC)) and confirms HMRC’s longstanding position, set out above.
The Court of Appeal found that when considering the definition of residential property, it is necessary to bear in mind what the “ordinary speaker of English” would characterise as residential property, that being the “sort of property that people live in”.