Claims that a property was not suitable for use as a dwelling

The legal test is strict. In Mudan v HMRC [2025] EWCA Civ 799, the Court of Appeal confirmed that a property remains a dwelling unless, at the date of purchase, it had lost its fundamental characteristics as a dwelling. Ordinary disrepair, however severe, is not enough. Very few properties qualify.

Before you consider a claim

Please read this first

A refund is not final. HMRC (or Revenue Scotland or the Welsh Revenue Authority) can open an enquiry into a claim within the statutory time limits, and in some cases later. If the claim fails, you must repay the refund with interest. You may also be charged a penalty if the authority considers the claim was made carelessly — for SDLT, up to 30% of the tax wrongly claimed for a careless error, and more if deliberate. These costs fall on you, not on me.

How I take on these claims

Given how strictly these claims are now treated, I take one on only if all of the following are in place:

  • A report from a chartered structural engineer on the condition of the building at the date of purchase
  • My formal Letter of Advice setting out the arguments for and against the claim
  • Your signed acknowledgement of the risk of an enquiry, interest and a penalty
  • Full disclosure to the tax authority, with the claim, of its basis and the evidence relied on

My fee is 20% of any refund, payable only if the refund is paid. If the tax authority later recovers the refund, my fee is refundable under my terms.

Nick Garner

Email me with details of the property and what condition it was in when you bought it. I'll tell you honestly whether I think it could meet the strict Mudan test. In most cases it will not, and I will say so.

nick@landtaxadvice.co.uk

Dwelling Identity Checker

This tool gives a rough first view of whether a claim that your property was "not suitable for use as a dwelling" could even be arguable under the legal test set by the Court of Appeal. Answer for the condition of the building at the date of purchase. The result is not advice, and it cannot tell you that a claim will succeed.

The Legal Test: Mudan v HMRC [2025] EWCA Civ 799

The Court of Appeal unanimously endorsed the Upper Tribunal's 7-point framework. The test is not whether the property is habitable, safe, or ready for occupation. It is whether the building has lost its fundamental characteristics — its identity — as a dwelling.

Lord Justice Lewison held (at para 69) that the UT's general principles were "legally sound, practical, workable, and reflect the intention of Parliament."

The key distinction (UT at para 54(2), endorsed by the Court of Appeal):

  • "A desirable house which has become dilapidated" — still a dwelling, even if dangerous, uninhabitable, or requiring complete renovation
  • "An empty shell with no main roof" — no longer a dwelling; identity lost

Critical points from the judgment:

  • Previous use as a dwelling is a "very strong indication" that the building possesses dwelling characteristics (UT para 54(1))
  • The definition is concerned with the building, not its internal fit-out (Court of Appeal para 63)
  • Unsafe occupation (e.g. dangerous electrics) is a relevant factor but does not by itself render the building unsuitable (UT para 54(5))
  • Defects must be assessed for whether they are capable of remedy — if works would be so dangerous or hazardous as to prejudice their viability (as in Bewley, where asbestos prevented repair), the building is unlikely to remain suitable (UT para 54(4))
  • The court is not restricted to a snapshot on the completion date — past history and whether the building retains its identity are relevant (Court of Appeal paras 58, 66)
Part 1: Identity Assessment

These questions ask whether the building still had its fundamental characteristics as a dwelling. If it had been used as a dwelling before you bought it, that is a very strong indication that it still had them (UT para 54(1)).

Part 2: Condition Assessment (Score 1–5)

Important: Under the Mudan framework, the question is whether the building had lost its identity as a dwelling. Most "habitability" issues — including dangerous electrics, broken boilers, damp, mould, and infestation — are relevant, but not enough on their own (UT para 54(5)). Score each item honestly for the condition at the date of purchase.

CRITICAL FACTORS (May Affect Dwelling Identity)

These are the factors most likely to bear on whether the building had lost its identity as a dwelling — for example, structural collapse, a legal prohibition on occupation, or conversion to a non-residential use. Even a high score here needs specialist evidence before a claim could be considered.

0
  • Score 5: No roof; walls collapsed; open to sky — "empty shell"
  • Score 4: Major structural failure; roof missing or severely compromised
  • Score 3: Large holes in roof; partial collapse of structure
  • Score 2: Leaking roof; missing tiles (repairable defect)
  • Score 1: Roof and shell intact
0
  • Score 5: Unsafe/collapsed; demolition required; building condemned
  • Score 4: Severe structural movement; floors collapsed; walls buckling
  • Score 3: Subsidence requiring underpinning; partial floor collapse
  • Score 2: Cracks and settlement (repairable)
  • Score 1: Structurally sound
0
  • Score 5: Permanent legal ban on residential occupation
  • Score 4: Prohibition Order / Dangerous Structure Notice in force
  • Score 3: Planning restriction to non-residential use
  • Score 2: Improvement notice or enforcement action only
  • Score 1: No legal restrictions on residential use
0
  • Score 5: Fully converted to commercial/other use; residential identity gone
  • Score 4: Residential layout removed; commercial fit-out installed
  • Score 3: Mixed use / partial conversion underway
  • Score 2: Minor commercial alterations; residential layout intact
  • Score 1: Residential layout intact; no conversion
0
  • Score 5: Structural collapse caused by fire/contamination
  • Score 4: Asbestos or contamination preventing ANY safe repair (Bewley)
  • Score 3: Fire damage to roof/floors but repairable
  • Score 2: Smoke damage / surface contamination (cleanable)
  • Score 1: No fire or contamination
Repairable defects — not enough on their own

These issues go to the building's state of repair or habitability. They are relevant, but not enough on their own: on the Mudan approach they do not stop a property being a dwelling unless they have caused the structure itself to fail (in which case, score that under Structural Integrity above). Score them honestly — a high score here does not change the result.

0
  • Score 5: All services stripped out / never connected
  • Score 4: Dangerous wiring / condemned electrics / lead pipes
  • Score 3: Services disconnected or needing full replacement
  • Score 2: Minor faults; services need updating
  • Score 1: Working services
0
  • Score 5: Rot causing structural floor/roof collapse
  • Score 4: Severe black mould / infestation (health risk)
  • Score 3: Widespread damp / woodworm
  • Score 2: Localised damp
  • Score 1: Dry and clean
0
  • Score 5: Derelict for decades; structural ruin
  • Score 4: Smashed windows; doors missing; rubbish throughout
  • Score 3: Long-term empty; overgrown
  • Score 2: Recently vacated
  • Score 1: Occupied or recently occupied

What counts as "not suitable for use as a dwelling"?

Following the Court of Appeal's judgment in Mudan v HMRC [2025], the legal test is strict. A property remains a dwelling unless it has lost its fundamental characteristics as a residential building. This is very different from normal renovation or modernisation — rewiring, plumbing, or cosmetic work do not meet the threshold.

A claim may be arguable only if, at the date of completion, the building had:

• Collapsing or unsafe floors, walls, or roof structure

• A missing or severely compromised roof

• Dangerous contamination such as asbestos preventing repair

• A legal prohibition on occupation (e.g. Dangerous Structure Notice) (depending on its terms)

• Been effectively reduced to an empty shell

Even then, the tax authority is likely to challenge the claim, and strong independent evidence from the time of purchase is essential.

Important: Damp, mould, broken windows, dangerous electrics, or lack of a boiler are "background" issues. Under Mudan, they do not stop a property being a dwelling unless they have caused the structure to collapse.

We are very selective about the cases we submit. HMRC is actively challenging poorly evidenced claims and scrutinising both taxpayers and agents for incorrect or speculative filings.