In a decision with important implications for property investors and developers, the Court of Appeal has upheld HMRC’s interpretation of “residential property” for Stamp Duty Land Tax (SDLT) purposes, confirming that substantial renovation needs do not necessarily disqualify a property from being treated as residential.
In Mudan v HMRC [2025] EWCA Civ 799, the taxpayers had acquired a large detached house in London that, while previously occupied as a dwelling, required major works including complete rewiring, plumbing, boiler replacement, and structural repairs. They argued that the property was uninhabitable and therefore not “suitable for use as a dwelling” within the meaning of s.116(1)(a) Finance Act 2003, and so should be taxed at the lower mixed-use (non-residential) SDLT rates under Table B.
Both the First-tier Tribunal and the Upper Tribunal found against them, holding that the property retained its residential character. The Court of Appeal has now confirmed that interpretation, rejecting the argument that suitability for use must mean “immediate habitability.”
Lord Justice Lewison, giving the leading judgment, held that the phrase “suitable for use as a dwelling” should not be equated with “ready for immediate occupation.” Instead, the focus is on the property’s fundamental characteristics, including prior residential use, structural integrity, and capacity for domestic living—even if significant repairs are required. The Court accepted that a property may remain residential for SDLT purposes despite temporary uninhabitability, provided it retains its residential identity.
Importantly, the Court ruled that interpreting “suitable for use” too narrowly would lead to arbitrary and anomalous results, for instance, treating unfinished new-builds as residential while denying that status to existing homes undergoing renovation.
This decision provides valuable guidance on SDLT treatment of dilapidated residential properties and supports HMRC’s broader interpretation. Taxpayers should be cautious in relying on the condition of a property to claim mixed-use relief and should consider whether the building retains its essential residential character at the effective date of the transaction.