A £2.4m Asbestos House Was Not a Dwelling for Stamp Duty. A Scottish House Empty 12 Years Still Was

Two Run-Down Houses, Two Opposite Answers

Stamp duty land tax (SDLT), collected by HMRC in England and Northern Ireland, and land and buildings transaction tax (LBTT), collected by Revenue Scotland, are separate taxes. They share one definition. Residential property is a building “used or suitable for use as a dwelling”: section 116 of the Finance Act 2003 for SDLT, section 59 of the Land and Buildings Transaction Tax (Scotland) Act 2013 for LBTT. A building too far gone for that use is non-residential, and in Scotland it is outside the Additional Dwelling Supplement.

Oakwood Great Oak Ltd v HMRC [2026] UKFTT 01138 (TC), decision TC 09979, was heard by Tribunal Judge Stapenhurst and Mr L Howard and released on 5 August 2026. The company bought “Great Oak”, Prowse Avenue, Bushey Heath, a 1930s detached house with a 1960s extension, on 29 November 2022 for £2,400,000 and filed its return as non-residential. HMRC's closure notice of 22 December 2023 treated it as residential. The company had always planned to demolish the house and build two new ones, and it has since been demolished, but the tribunal gave that intention limited weight because the test is objective (paragraphs 162 and 163). It allowed the appeal.

LMT Property Investors Ltd v Revenue Scotland [2026] FTSTC 3 was heard by Anne Scott, President of the First-tier Tribunal for Scotland Tax Chamber, and member Charlotte Barbour, and released on 1 May 2026. The company bought a detached bungalow in Selkirk at auction for £110,000, with an effective date of 7 February 2025. It obtained the Home Report but “did no research and did not view the Property” (paragraph 13). Because £110,000 is below the LBTT nil-rate threshold, the only tax was the supplement: £8,800, or 8%, the rate in force since 5 December 2024. The company later amended its return to claim that back. Revenue Scotland refused, and the tribunal dismissed the appeal.

The Mudan Test Both Tribunals Applied

Both panels applied Mudan & Anor v HMRC [2025] EWCA Civ 799, decided by the Court of Appeal on 27 June 2025. The Mudans argued that a house needing complete rewiring and a new boiler, which could not be lived in on the purchase date, was not suitable for use as a dwelling. Lord Justice Lewison said that read “suitable for use” as “suitable for immediate use”: “But that, quite simply, is not what the definition says” (paragraph 66). For a former home, “one highly relevant question is whether on the relevant date it has lost that identity” (paragraph 48).

The court endorsed the seven considerations set out by the Upper Tribunal at paragraph 58 of [2024] UKUT 307 (TCC). The ones that decided these two cases:

• Is the building a dilapidated house that needs updating, or an empty shell with no main roof?
• Are the works needed to make it habitable, or only to make it “a pleasant place to live”?
• Are the defects fixable, or would the works be too hazardous to be viable or threaten the structure?
• Unsafe occupation, for example because the house needs rewiring, is relevant but not decisive on its own.

LBTT uses the same words, and the Scottish tribunal treated Mudan as authoritative guidance on their meaning (paragraphs 68 to 70). The same weighing of many factors, with no single one decisive, runs through this year's SDLT garden and grounds tribunal rulings.

The Two Properties Side by Side

The sharpest difference is the evidence. Oakwood had structural and costing reports dated October 2022, before it completed. LMT bought unseen, and its Home Report recorded a furnished house with no urgent repairs. The company called that report “completely untrue” (paragraph 29), but the tribunal found that the house was fully furnished at the point of purchase (paragraph 77).

What Tipped Oakwood Over the Line, and Why LMT Fell Short

HMRC won several arguments and still lost. The tribunal accepted that the house still stood with a recognisable residential layout (paragraph 133), was not at risk of immediate structural failure (paragraph 95), and could physically be repaired (paragraph 96). HMRC accepted it was unsafe to occupy, but argued that a defect capable of remedy is fixable whatever it costs (paragraphs 60 and 68). Three points carried the company:

• Theoretical repairability is not the test. “Almost any standing structure can be said to be capable of repair if one assumes the availability of unlimited time, resources and expenditure” (paragraph 143).
• The asbestos did double damage. Licensable asbestos sat in numerous locations, including the basement, service areas and roof void (paragraphs 100 and 101). Removing it meant removing the services and installations it was bound up with, leaving the house “in a materially more stripped-out condition” (paragraph 113).
• Cost was evidence, not a test. The tribunal declined to fix the cost of the works or to treat economic viability as a legal test, but took the scale of the spend as evidence of how far the house had deteriorated (paragraphs 118 to 123).

None was decisive alone. Taken together: “This was not merely a dwelling awaiting renovation. Nor was it simply an unmodernised property requiring substantial refurbishment” (paragraph 174). The house had “crossed the line contemplated in Mudan” (paragraph 176).

Why LMT fell short. The Selkirk house had dangerous electrics that had been switched off, lead in the water, no damp-proof course and rotten timbers in the extension roof, and Revenue Scotland accepted it was unlikely to have been habitable at the effective date (paragraph 43). But the main roof was intact (paragraph 81), the gutting was in large part the company's own choice (paragraph 82), the water could be used and the lead was fixable (paragraph 83), and rewiring “would be almost routine in a property of this age” (paragraph 85). Twelve empty years were noted, but the owner had died and the executors had obtained Confirmation only months before the sale (paragraph 79).

The company argued that a dwelling must be habitable and safe on the effective date. “The problem for the Appellant is that that is not the test” (paragraph 74). The property was “indeed a ‘fixer-upper’. It was, and remained, suitable for use as a dwelling” (paragraph 89).

The AI Warning in LMT

The company's written submissions contained “a number of inaccurate references to case law” and cited Grahame v Revenue Scotland [2018] FTSTC 11, a case that does not exist (paragraph 7). The tribunal found that, on the balance of probability, the company had likely used AI, and accepted that it had acted in good faith. In the same paragraph it warned that AI “can be unreliable and can produce ‘hallucinations’ (ie non-existent cases as in this instance) and also cite cases that are not authority for the propositions that they purport to establish.” As the company had not ultimately relied on the case, the tribunal took it no further (paragraph 8).

The decision shows the second risk too. The company cited Ball & Torokoff v Revenue Scotland [2024] FTSTC 6 for the idea that a property lacking facilities for immediate habitation cannot be a dwelling. The same panel had decided Ball, and said it “certainly was not authority” for that (paragraph 75). The tribunal did not say whether AI was behind that reading. Its decisions are published in full on its website and can be checked there (paragraph 9).

What It Means If You Bought a Run-Down House

For most buyers, nothing has changed. A former home that needs work, even serious work, is still a dwelling. HMRC's warning of 31 July 2025 said “repayment claims based solely on a property's condition are not valid.” Its example was a buyer who took a repayment agent's “no win, no fee” offer, received £6,475 of a £9,250 refund after the agent's 30% fee, then owed the full £9,250 plus interest and a penalty. The rules and the cases so far are in our guide to the uninhabitable property stamp duty refund.

• Evidence from the effective date decides these cases. Oakwood's surveys pre-dated completion. LMT relied on a Home Report it later disputed.
• Stripping a house out does not strengthen a claim. In LMT the gutting after completion was treated as the buyer's choice, not as evidence of the condition it bought.
• Scotland is a separate regime. A company buying a Scottish dwelling for £40,000 or more pays the 8% supplement on almost every purchase, even if it owns no other home, and Revenue Scotland's guidance page LBTT4010, updated on 8 May 2026, now lists LMT among the tribunal decisions it cites. Check the figures with our Additional Dwelling Supplement calculator.

SDLT and LBTT are both self-assessed. If a non-residential claim is overturned, the tax is repaid with interest, and a penalty can follow where a return was careless. For amendment deadlines and other routes, see Stamp Duty Refund: Can You Claim It Back?

Both decisions are first-tier rulings that bind no other tribunal, and Mudan remains the binding authority on SDLT. HMRC had 56 days from when the Oakwood decision was sent to the parties to apply for permission to appeal (paragraph 179). Whether it applied is not on the public record. In LMT the deadline was 30 days (paragraph 92), and we have found no published appeal.

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