Uninhabitable Property Stamp Duty Refund: Can You Claim?
Rarely. In HMRC's own example, a buyer was refunded £9,250 on a house that needed a new boiler, rewiring and damp proofing, kept £6,475 after the agent's 30% fee, then had to repay the full £9,250 plus interest and a penalty. The Court of Appeal in Mudan (2025) confirmed that a home needing repair is still residential. The cases that went the taxpayer's way, Bewley (2019) and Oakwood Great Oak (2026), involved buildings in a far worse state.
Last verified: 29 August 2026
Key Takeaways
- •A home that needs repairs does not qualify for a refund: HMRC's July 2025 example of a failed £9,250 claim left the buyer repaying it all, plus interest and a penalty, after losing a 30% agent fee
- •A property is a "dwelling" for SDLT under s116 FA2003 if it is "suitable for use as a dwelling", not based on actual habitability on the date of purchase
- •P N Bewley Ltd v HMRC [2019] UKFTT 65 (TC) is the foundational case: the taxpayer WON, with the First-tier Tribunal ruling that a genuinely derelict bungalow requiring effective rebuilding was NOT "suitable for use as a dwelling" and qualified for non-residential SDLT rates
- •The suitability test asks whether the building is, in its present condition at the effective date, actually practical to use as a dwelling without effective rebuilding
- •The governing authority is now Mudan & Anor v HMRC [2025] EWCA Civ 799, where the Court of Appeal confirmed a multifactorial assessment: "suitable for use" does not mean ready for immediate occupation, so cosmetic disrepair alone is never sufficient
- •Oakwood Great Oak Ltd v HMRC [2026] UKFTT 01138 (TC), released 5 August 2026, is the first significant taxpayer win under the Mudan test: widespread asbestos, three to four years of vacancy and structural defects together took a £2.4m house outside the dwelling definition. It is a First-tier decision, so it binds nobody
- •HMRC will not give a clearance on whether a property is still a dwelling, because that is a question of fact. In a borderline case the protection is evidence: a structural engineer's report and a record of the property's condition at completion, plus specialist advice before you file
Can You Claim a Stamp Duty Refund on an Uninhabitable Property?
Only if the building was not suitable for use as a dwelling on the day you bought it, so the non-residential rates should have applied. A home that needs a new kitchen, boiler, rewiring or damp proofing does not qualify. In Mudan & Anor v HMRC [2025] EWCA Civ 799 the Court of Appeal confirmed that a dwelling in need of repair is still residential and that "suitable for use" does not mean ready to move into. HMRC's 31 July 2025 warning put it plainly: repayment claims based solely on a property's condition are not valid.
The cases so far
| Case | Court | Result | What decided it |
|---|---|---|---|
| P N Bewley Ltd v HMRC [2019] UKFTT 65 (TC) | First-tier Tribunal | Taxpayer won | A derelict bungalow that needed effective rebuilding |
| Mudan & Anor v HMRC [2025] EWCA Civ 799 | Court of Appeal | HMRC won | A house in poor repair kept the characteristics of a dwelling |
| Oakwood Great Oak Ltd v HMRC [2026] UKFTT 01138 (TC) | First-tier Tribunal | Taxpayer won | Empty for three to four years, with substantial structural defects and asbestos throughout |
Mudan is the binding authority. First-tier decisions like Oakwood bind nobody, but they show the kind of facts that can still win. What a genuine claim is worth depends on who is buying. On the £750,000 farmhouse in the worked example below, a buyer paying standard rates would save only £500 (£27,500 against £27,000). A buyer who would pay the 5% higher rates owes £65,000 at residential rates, so the non-residential rates would save £38,000.
To claim, amend the SDLT return within 12 months of its filing date. After that, overpayment relief runs to four years after the effective date, with exclusions. The stamp duty refund guide covers both routes. SDLT is self-assessed, so if a claim is wrong you repay it with interest and any penalty, even when an agent filed it.
The s116 FA2003 Dwelling Definition
Section 116(1)(a) FA2003 makes residential property of "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". The critical phrase is "suitable for use", not "currently used" or "in a condition fit for use." The distinction is fundamental and is the source of enormous disputes between taxpayers and HMRC.
A property that is physically uninhabitable, with no heating, no working facilities, structural defects, or requiring complete renovation, can still be classified as a "dwelling" for SDLT purposes unless the works it needs mean it has lost the characteristics of a dwelling at completion. The fact that no one could reasonably live in it today does not, by itself, mean it falls outside the dwelling definition.
At standard rates the residential and non-residential schedules differ by only £500 between £150,000 and £925,000, but residential rates rise to 10% and 12% above that, and the 5% additional dwelling surcharge applies to residential purchases where the buyer keeps another property. Misclassifying a property as non-residential understates SDLT and can result in HMRC enquiries, assessments, and penalties.
The s116 test asks about the state of the property at the effective date of the transaction. HMRC and the courts look beyond superficial condition to the works the building needs and whether they can be done. A building that keeps the characteristics of a dwelling is treated as suitable for use as one, even if nobody could move in today.
The Bewley Case (2019)
The foundational case is P N Bewley Ltd v HMRC [2019] UKFTT 65 (TC), decided by the First-tier Tribunal in January 2019. The facts involved a company's purchase of a derelict bungalow in Weston-super-Mare that was so dilapidated it required effective demolition and rebuilding: the property had asbestos insulation throughout, a collapsing roof, ripped-out central heating pipes, and was scheduled for planning permission to demolish and replace.
The taxpayer argued that because the bungalow could not practically be used as a dwelling without effective rebuilding, it was not "suitable for use as a single dwelling" at the effective date and therefore attracted non-residential SDLT rates. HMRC disagreed, arguing the property was a dwelling in character and attracted residential rates.
The tribunal sided with the TAXPAYER. The key ratio was that "suitable for use as a dwelling" requires an actual assessment of the building's condition at the effective date, not merely its architectural type. A building so derelict that meaningful habitation requires effective rebuilding is not "suitable" at that date and falls outside the s116 FA 2003 residential definition. The taxpayer saved a substantial amount of SDLT as non-residential rates applied to the whole purchase price.
The Bewley Test in Practice
Bewley asks whether the building is, in its present condition at the effective date, actually suitable for use as a dwelling. Cosmetic disrepair (needing new kitchen, bathroom, redecorating) is NOT enough. The property must be so far gone that it has lost the characteristics of a dwelling. Later cases, above all Mudan & Anor v HMRC [2025] EWCA Civ 799 in the Court of Appeal, alongside Hyman v HMRC and Fish Homes, have stressed that most dilapidated but structurally sound houses are still "dwellings" for SDLT.
Mudan and the Oakwood Win (2026)
Bewley is where this argument starts, but it is no longer where it is decided. The governing authority is Mudan & Anor v HMRC [2025] EWCA Civ 799, in which the Court of Appeal upheld the Upper Tribunal ([2024] UKUT 307 (TCC)) and settled two points. First, "suitable for use as a dwelling" does not mean suitable for immediate occupation, so a house that needs work is still a dwelling. Second, where a building has previously been used as a dwelling, the question is whether it has lost that identity by the effective date. The assessment is multifactorial, and the Upper Tribunal set out seven considerations at paragraph 58 of its decision.
That test has been hard for taxpayers to satisfy, and most attempts since have failed. Then, on 5 August 2026, the First-tier Tribunal allowed an appeal under it in Oakwood Great Oak Ltd v HMRC [2026] UKFTT 01138 (TC).
The property was a substantial detached house in Bushey Heath, bought on 29 November 2022 for £2.4m and returned as non-residential. HMRC opened an enquiry and issued a closure notice treating it as residential. The tribunal found that at the effective date the house had been vacant for three to four years, suffered significant damp, mould and water ingress, had substantial structural and fabric defects, contained widespread asbestos-containing materials that needed specialist removal before anyone could live there, and was not safe to occupy.
Why Oakwood succeeded where most claims fail
- Theoretical repairability is not the test. The tribunal refused to let the question turn on whether repair was possible in the abstract, observing that almost any standing structure can be said to be capable of repair if you assume unlimited time, resources and expenditure.
- The asbestos did double damage. Removing it would not have left the house intact. It would have stripped out services and installations, so the remediation itself created the need for extensive reinstatement before the building could function as a dwelling again.
- Cost was treated as evidence, not as a test. Remediation was costed at roughly £2.25 million against the £2.4m purchase price. The tribunal expressly declined to treat economic viability as a separate legal test, and declined to find the exact figure, but took the scale of the spend as evidence of how far the building had deteriorated.
Two findings cut the other way, and they are the ones HMRC will press in the next case. The house was still standing and retained a recognisable residential layout, and remediation was not physically impossible. The tribunal gave both real weight and still allowed the appeal, on the cumulative effect of the conditions rather than on any single feature. It also gave only limited weight to the fact that the buyer had always intended to demolish and redevelop, and had obtained planning permission to do so, because the statutory question is objective and a purchaser's intentions do not decide it.
Do not read Oakwood as a green light
It is a First-tier Tribunal decision, so it binds no other tribunal, and HMRC had 56 days from 5 August 2026 to apply for permission to appeal. The facts were extreme: years of vacancy, structural defects, and asbestos contamination throughout that made occupation unsafe and that could not be dealt with without gutting the building. A tired house needing a new kitchen, rewiring and damp proofing is nowhere near this, and a non-residential claim on that basis remains the losing argument HMRC has been publicly warning buyers about.
Three-Part Suitability Test
Mudan makes the assessment multifactorial rather than a checklist, and no single item below is decisive on its own. In practice, though, three interconnected factors do most of the work when deciding whether a derelict or uninhabitable property qualifies as non-residential:
Structural Capacity
Is the building structurally sound, and can its defects be fixed? Walls, floors and a roof, even damaged ones, point towards a dwelling, but they do not settle it. In Oakwood the house still "retained a recognisable residential layout" and was held non-residential, because it needed extensive structural works and asbestos removal before it could function as a dwelling again. The Upper Tribunal in Mudan asks whether the defects can be remedied, and whether the works could be done safely without putting the structure at risk.
Dwelling Layout
Does the property have the layout characteristics of a dwelling, with rooms configured for living, sleeping, cooking, and sanitation, even if those facilities are currently non-functional or missing? A building designed as offices, a warehouse, or a barn does not inherently have a dwelling layout, even if it could theoretically be converted.
Residential Planning Status
Is the property's permitted use residential? A building in an agricultural or commercial use class, even one with residential characteristics, is not automatically a dwelling. Planning status is a factor, not the answer: HMRC's manual says planning conditions are "not necessarily determinative" (SDLTM00380), and the Upper Tribunal in Mudan said past use as a dwelling does not keep a building suitable for use as one "regardless of what happens to the building".
Worked Example: Derelict Farmhouse at £750,000
A buyer purchases a derelict farmhouse and outbuildings for £750,000. The farmhouse has been unoccupied for 8 years, has no functioning utilities, the roof is partially collapsed, and requires complete renovation estimated at £350,000. The buyer argues it is non-residential.
Buyer's Position: Non-Residential
Argues 5% rate on non-residential bands
HMRC's Position: Residential
Applies standard residential rates
The Dispute at Stake
For a buyer paying standard rates the difference between the two positions is only £500. If the buyer would pay the 5% higher rates, for example because they already own another home, residential SDLT is £65,000 and the difference is £38,000. Taking the non-residential position without strong evidence risks an HMRC assessment for the difference, plus interest and penalties.
Whether the farmhouse qualifies as non-residential depends on the works the partial roof collapse needs, taken together with its other defects, and whether they can be carried out safely. If the walls remain intact and the building retains a residential layout, HMRC is very likely to argue it remains a dwelling under the Mudan test. The non-residential position needs strong evidence of the condition at completion, such as a structural engineer's report on what works are needed, whether the defects can be fixed, and whether the works could be done without putting the structure at risk.
Mixed-use rates top out at 5%. Residential goes to 12%
A flat above a shop, a farm or a house with land can qualify. A specialist checks whether yours does.
Edge Cases
Fire or flood damage
A property damaged by fire or flooding but keeping its walls and residential layout is very likely to be treated as a dwelling. HMRC's manual lists flood damage, and structural defects that can be repaired, among conditions that do not stop a property being suitable for use as a dwelling (SDLTM00385). The answer changes only where the works needed are so extensive, or so hazardous, that the building no longer has the characteristics of a dwelling at completion.
Barn with conversion potential
Planning permission alone does not make a barn residential, and that includes permitted development rights to convert it. HMRC's manual (SDLTM00400) says conversion must be physically underway at completion: permission on its own does not count if the work has not started. A barn with only the potential to be converted is unlikely to be a dwelling, unless it is part of the garden or grounds of a house. See our guide to stamp duty on a barn conversion.
Foundation only or cleared site
Where a former dwelling has been demolished to foundation level, HMRC generally accepts this is no longer a dwelling. There is no building structure that could be "suitable for use as a dwelling." Purchasing bare land with foundations would typically attract non-residential SDLT rates. However, if demolition has not been completed and structure remains, the position is much less clear.
HMRC's Approach to These Claims
HMRC's manual says "a very high proportion" of the SDLT repayment claims it receives in this area are wrong (SDLTM00385). Its list of conditions that do not make a property unsuitable for use as a dwelling includes kitchen or bathroom facilities temporarily removed before sale, damp, unsafe wiring, flood damage, the presence of asbestos, and structural defects that can be repaired.
A buyer who returns a residential property as non-residential faces an assessment for the SDLT underpaid, with interest from 14 days after the effective date (usually completion), plus a penalty if HMRC concludes the return was careless or deliberate.
In an enquiry the question is the property's condition at the effective date, so evidence recorded at or before completion carries the case: surveys, photographs, and a structural engineer's report on the works needed and whether they could be done.
HMRC's July 2025 warning
After the Court of Appeal decided Mudan, HMRC warned homebuyers about agents offering "no win, no fee" refunds on the basis that a property was uninhabitable, said repayment claims based solely on a property's condition are not valid, and said it is using civil and criminal powers against spurious claims. Poor condition alone does not make a property non-residential.
Mitigation Strategies
Obtain a structural engineer's report pre-transaction
Commission a report from a qualified structural engineer before exchange of contracts. The report should set out the works needed to make the property habitable, whether the defects can be remedied, and whether the works could be done safely without putting the structure at risk. A report obtained post-purchase carries less weight with HMRC.
Take specialist advice before filing, not an HMRC clearance
HMRC will not settle this question for you in advance. Its Non-Statutory Clearance Service does not give clearances on matters of fact, and HMRC's SDLT manual says that whether a property has deteriorated so far that it no longer comprises a dwelling is a question of fact. Nor is the service a confirmation service: HMRC says requests for reassurance that your position is correct will not be accepted. That holds after completion as well as before, and HMRC will not give advice at all once it is checking your return. The protection has to come from your own evidence and from independent specialist SDLT advice before the return is filed or amended, not from a repayment agent working on a "no win, no fee" basis. SDLT is self-assessed, so if the property turns out to be residential you owe the difference with interest, plus a penalty if the error was careless.
Document the condition thoroughly at purchase
Photographs, video recordings, independent surveys, and valuation reports that document the precise condition at the effective date are essential evidence if HMRC later challenges the classification. Evidence gathered at the time of purchase is far more persuasive than retrospective descriptions of what the property was like.
Consider paying residential rates with a protective claim
In borderline cases, some practitioners advise clients to pay SDLT at residential rates, avoiding any risk of underpayment, and then put the claim in for the difference. Get the route right. While the return is still open to amendment, which is 12 months after the filing date, the claim is made by amending the return under Sch 10 para 6 FA2003, not by claiming overpayment relief: Case B in Sch 10 para 34A blocks overpayment relief where the taxpayer can correct the position by other means. Overpayment relief under Sch 10 para 34 only becomes the route once that window has shut, and it must then be claimed within 4 years of the effective date (para 34B(1)). Either way, HMRC has to actively reject the claim, which creates a cleaner evidential record. The approach trades upfront cash flow for reduced legal and interest risk.
Frequently Asked Questions
Can I get a stamp duty refund because my house needed renovation?
Almost certainly not. In Mudan & Anor v HMRC [2025] EWCA Civ 799 the Court of Appeal confirmed that a home in need of repair is still residential if it keeps the characteristics of a dwelling. In HMRC's July 2025 example, a buyer was refunded £9,250 on a house needing a new boiler, rewiring and damp proofing, kept £6,475 after the agent's 30% fee, then had to repay the £9,250 plus interest and a penalty.
Is a derelict property classed as a dwelling for stamp duty?
Usually yes. A house in poor repair stays a dwelling if it keeps the characteristics of one, and HMRC lists damp, unsafe wiring, flood damage, asbestos and repairable structural defects among conditions that do not stop a property being suitable for use as a dwelling (SDLTM00385). It falls outside the definition only where the works needed are so extensive or hazardous that it has lost those characteristics by completion, the test set by the Upper Tribunal in Mudan and upheld by the Court of Appeal ([2025] EWCA Civ 799). Oakwood Great Oak Ltd v HMRC [2026] UKFTT 01138 (TC) is a recent case where that bar was met.
What is the Bewley case and how does it affect stamp duty?
P N Bewley Ltd v HMRC [2019] UKFTT 65 (TC) is the foundational First-tier Tribunal decision on the SDLT "dwelling" definition. The tribunal held that a derelict bungalow in Weston-super-Mare, requiring effective rebuilding, was NOT "suitable for use as a dwelling" under s116 FA 2003 and qualified for non-residential rates. The case established that genuine structural unsuitability (not mere cosmetic disrepair) can take a property outside the residential definition. The governing authority is now the Court of Appeal in Mudan & Anor v HMRC [2025] EWCA Civ 799, which set a high bar: suitable for use does not mean ready for immediate occupation.
Has any taxpayer recently won an uninhabitable property SDLT case?
Yes. In Oakwood Great Oak Ltd v HMRC [2026] UKFTT 01138 (TC), released 5 August 2026, the First-tier Tribunal allowed an appeal against HMRC's decision that a £2.4m house in Bushey Heath was residential property. The house had been vacant for three to four years, had substantial structural defects and damp, and contained asbestos throughout that made occupation unsafe and could not be removed without stripping out services and installations. Applying the Court of Appeal's test in Mudan, the tribunal found the building had lost the characteristics of a dwelling. It is a First-tier decision, so it binds no other tribunal, and the facts were extreme. It does not help a buyer whose property simply needs modernising.
Can I claim non-residential rates on an uninhabitable property?
You can file an SDLT return on the basis that the property is non-residential, but you must have strong evidence to support that position: specifically, that by completion the building had lost the characteristics of a dwelling because of the works it needed. HMRC's own manual (SDLTM00385) says a very high proportion of the repayment claims it receives in this area are wrong. HMRC will not confirm the position in advance through a clearance, because whether a property is still a dwelling is a question of fact. Without a structural engineer's report on the works needed and whether they could be done, and a record of the property's condition at completion, the risk of a successful HMRC challenge is substantial.
How can I reduce the risk of HMRC challenging my property classification?
The most effective strategies are: (1) obtain a pre-purchase structural engineer's report on the works needed and whether the defects can be remedied, not just its general condition; (2) document the property's condition thoroughly at the effective date with photographs, independent surveys, and professional opinions; and (3) take independent specialist tax advice before filing the return, since a careless error attracts a penalty on top of the SDLT underpaid and interest. Do not plan on an HMRC clearance: HMRC does not give clearances on matters of fact, and whether a property is still a dwelling is a question of fact.
Reviewed by
Julie White
ACAStamp duty specialist since 1999Stamp Duty Land Tax Specialist
ACA and Tax Adviser with a career spanning nearly four decades, specialising in stamp duty planning and advisory work since 1999.