SDLT Refunds and Uninhabitable Properties: What You Need to Know

SDLT and uninhabitable dwellings

In a recent Agent Update, HMRC announced that they have received a high number of claims for refunds of Stamp Duty Land Tax (SDLT) on the basis that a property, which is in need of repair, is not ‘suitable for use as a dwelling’. HMRC’s view is that over 95% of repayment claims submitted in this area are incorrect. This factsheet considers the circumstances in which a refund of SDLT can be claimed.

SDLT on uninhabitable property

SDLT is applicable in England and Northern Ireland. The rates of SDLT are higher for residential property than for uninhabitable property.

If a buyer paid the higher residential rates of SDLT but the property is genuinely uninhabitable, a refund claim can be made to HMRC in respect of the overpaid SDLT.

However, in HMRC’s SDLT Manual, they state “A very high proportion of the SDLT repayment claims that HMRC receives in relation to this area are wrong. Customers should be cautious about being misled by repayment agents into making incorrect claims.”

What is uninhabitable property?

In this context, ‘uninhabitable’ means ‘not suitable for use as a dwelling’, usually because the property has deteriorated or is damaged and that normal repair work, replacement or modernisation cannot resolve the issues. HMRC considers that this situation only applies to a small minority of buildings.

In a recent Upper Tribunal decision (Amarjeet Mudan and Tajinder Mudan v HMRC), it was found that:

• being suitable for use as a dwelling does not mean the same thing as ready for immediate occupation;

• you should assess to what extent the building has the fundamental characteristics of a dwelling, and is structurally sound;

• if a property has previously been used as a dwelling, this will be relevant for considering whether it is suitable for use as a dwelling; and

• the question to consider is whether the works of repair and renovation have the result that the building no longer has the characteristics of a dwelling.

HMRC states that the following repairs, renovations and issues will not make a property unsuitable for use as a dwelling because they do not constitute structural changes to the dwelling that would mean the building is uninhabitable:

·        The temporary removal of bathroom or kitchen facilities before sale;

·        Substantial repairs required to windows, floors, 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; and

·        Flood damage.

Why is this issue important?

HMRC is aware of an increasing number of repayment agents who encourage or facilitate making refund claims for SDLT. Incorrect claims can result in penalties for taxpayers, so it is wise to exercise caution in this area.

If you have any questions about SDLT refund claims, please contact us – we would be happy to help.

Further information 

SDLT Manual: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00385#:~:text=SDLTM00385%20-%20Scope:%20what%20is%20chargeable

The Mudan Upper Tribunal decision: https://www.gov.uk/tax-and-chancery-tribunal-decisions/amarjeet-mudan-and-tajinder-mudan-v-the-commissioners-for-his-majestys-revenue-and-customs-2024-ukut-00307-tccSDLT