In a recent Upper Tribunal case, Amarjeet Mudan and Tajinder Mudan vs HMRC [2024] UKUT 00307 (TCC), the critical issue of whether a building is "suitable for use as a dwelling" was at the heart of the dispute regarding Stamp Duty Land Tax (SDLT).
The case revolved around the Mudans' purchase of a property in London. Initially, they paid SDLT based on the assumption that the property was residential. However, they later sought a partial repayment, claiming that the property was not "residential property" due to its condition at the time of purchase. HMRC disagreed and upheld that the property was indeed suitable for use as a dwelling, triggering the appeal.
The central question was whether the property, though in a state of disrepair, was still suitable for use as a single dwelling. The Mudans argued that substantial renovation, including rewiring, plumbing work, and repairs to a leaking basement, made the property unsuitable for habitation at the time of purchase. They emphasized the need for repairs before it could be safely occupied.
HMRC maintained that while repairs were necessary, the property was structurally sound and had been recently used as a dwelling. The tribunal found in HMRC’s favor, emphasizing that the law allows for a degree of disrepair without affecting the classification as a "dwelling." The tribunal ruled that “suitable for use” does not mean “ready for immediate occupation.” The necessary repairs were considered minor and did not go beyond standard renovations, which kept the property within the scope of a residential classification for SDLT purposes.
This ruling highlights the nuances of SDLT liability, particularly around the condition of a property at the time of purchase. It underscores that buildings requiring repair may still be classified as dwellings, provided they maintain their fundamental characteristics as a residence. This case sets an important precedent for similar SDLT disputes, where the suitability of a property as a dwelling is questioned due to disrepair.