Stamp Duty Land Tax (SDLT) can be a confusing area, especially when dealing with run-down or damaged properties. A recent Court of Appeal ruling in the case Mudan v HMRC ([2025] EWCA Civ 799) brings important clarity to the residential SDLT rules, especially regarding properties in poor condition at the time of purchase.
Background to the Dispute
Mr. and Mrs. Mudan purchased a severely vandalized and dilapidated house. They intended to repair and live in the property as their main home. To fund the purchase, they used a residential mortgage, suggesting it was always intended as a dwelling.
Soon after acquiring the property, they carried out substantial works, including:
- Electrical rewiring
- Boiler replacement
- New windows
- Basement tanking
Initially, the couple paid SDLT at residential property rates. However, they later amended their return, claiming the home was uninhabitable when bought and should have been taxed under non-residential rates. HMRC disagreed and refused the refund.
Tribunal Decisions and Legal Arguments
The dispute progressed through the legal system:
- The First Tier Tribunal (FTT) supported HMRC, stating the home was still “suitable for use as a dwelling.”
- The Upper Tribunal (UT) agreed, noting the house always had residential characteristics, even if it required major repairs.
The Mudans then took their case to the Court of Appeal, arguing that both tribunals misinterpreted Section 116 of the Finance Act 2003, which defines residential property for SDLT purposes.
What the Court of Appeal Said
The Court of Appeal firmly dismissed the appeal and reaffirmed that residential SDLT rules apply even when the property needs substantial work. Key takeaways from the judgment include:
- Suitability, not current condition, is the key legal test. A property doesn’t lose its residential character just because it’s uninhabitable at a specific moment.
- SDLT classification should not be based on a “snapshot” view of the property’s condition on the day of completion.
- A house needing a kitchen or rewiring is still more “residential” than a site under full construction, missing a roof or stairs.
- The ordinary use of language still counts—a residential building under repair is still a residence.
Practical Insights for Buyers
For anyone buying distressed properties or considering renovation projects, this case serves as a firm reminder: if a home is designed or intended to be lived in, it will likely fall under residential SDLT rules—regardless of its physical condition.
If you’re unsure how this affects your SDLT liability, seeking professional advice can help you avoid disputes and penalties.
Conclusion
The Mudan v HMRC case sets a precedent that residential SDLT rules apply even when a property appears uninhabitable. Courts will look at the intended use and overall character—not just short-term conditions. If your property is a house, expect to pay residential SDLT, regardless of the amount of work required.
Do you have questions about your property tax situation? Let our expert team guide you through SDLT regulations and HMRC requirements.
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