Can you reclaim SDLT on a holiday bungalow with a 42-week occupancy restriction?

Introduction

People often ask whether Stamp Duty Land Tax (SDLT) was overpaid when they bought a holiday bungalow, lodge or similar property that cannot be occupied all year round. The issue usually arises where the title documents or site rules contain legally enforceable restrictions limiting occupation, for example to 42 weeks a year.

The question matters because SDLT applies differently depending on whether the property is treated as residential property. If a building is not suitable to be used as a dwelling, or is not properly classed as residential property for SDLT purposes, the tax position may be different. But timing is critical: even where there is a good substantive argument, HMRC claims are subject to strict statutory deadlines.

The Question

A buyer purchased a holiday bungalow on a holiday park and paid SDLT on completion. The bungalow was subject to legally enforceable covenants restricting occupation to 42 weeks per year. The buyer wanted to know whether that restriction meant the bungalow should not have been treated as residential property for SDLT, and whether an SDLT reclaim could still be made.

The buyer initially thought the purchase had completed more than four years earlier, but later corrected the completion date to a later year, bringing the case back within the normal time limit for an SDLT amendment or reclaim.

Nick’s Explanation

Nick’s core point was that occupancy restrictions of this kind may, in principle, support an SDLT reclaim argument. In anonymised form, his explanation was:

“Such covenants may indicate that the property should not be treated as a full residential dwelling for SDLT purposes. However, the law imposes strict time limits on making any claim for overpaid SDLT. A reclaim must normally be made within four years of the effective date of the transaction, usually completion.”

He therefore drew a clear distinction between:

• whether the legal argument on the nature of the property might exist; and
• whether HMRC is still legally required to consider the claim because it is in time.

Once the completion date was corrected and shown to fall within four years, the claim could proceed for review and submission.

The Law

SDLT is charged under Finance Act 2003. The amount payable depends in part on whether the subject matter of the transaction is residential property, non-residential property, or mixed property.

For SDLT purposes, residential property broadly includes a building that is used or suitable for use as a dwelling, or land that forms part of the garden or grounds of such a building. The question of whether a property is “suitable for use as a dwelling” has been heavily litigated.

Where a taxpayer believes too much SDLT was paid, the normal route is to amend the return or claim a repayment within the statutory time limit. In broad terms, the relevant time limit is four years from the effective date of the transaction. In most purchase cases, the effective date is the completion date.

That means a taxpayer may have a potentially good argument on the merits but still fail if the claim is made out of time.

In cases involving habitability or suitability for use as a dwelling, the courts have also made clear that the threshold for showing that a property is not suitable for use as a dwelling is now relatively high. In an uninhabitable or not suitable for use case, that point must now be considered in light of Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Analysis

The correct way to analyse this type of case is usually as follows.

First, identify the completion date. This is essential because the four-year time limit runs from the effective date of the transaction. If more than four years have passed, HMRC will usually be entitled to reject the reclaim as out of time, whatever the underlying argument may be.

Second, review the property documents carefully. The key evidence will often include:

• the transfer deed or TR1;
• the sale contract;
• the SDLT5 certificate;
• the completion statement;
• the title register and title plan;
• site rules, lease terms or covenants restricting occupation; and
• any planning permissions or planning conditions limiting use.

Third, consider the legal effect of the occupancy restriction. A simple practical limitation is not always enough. The stronger cases usually involve a legally enforceable restriction that materially prevents normal residential occupation, such as a prohibition on year-round use or a requirement that the unit be used only as holiday accommodation.

Fourth, consider how the property should be classified for SDLT. A taxpayer may argue that a holiday bungalow with a strict 42-week occupancy restriction should not have been treated as a normal residential dwelling. That argument depends on the precise wording and legal force of the restrictions, as well as the wider factual setting.

Fifth, avoid confusing this argument with a general “uninhabitable” claim. A property is not automatically outside the residential rules just because it has limitations or cannot be occupied every day of the year. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold for saying a property is not suitable for use as a dwelling is relatively demanding. Minor defects, inconvenience, disrepair, or restricted use will not necessarily be enough.

Sixth, if the claim is in time and there is a properly arguable basis, the taxpayer can submit the reclaim to HMRC with supporting documents and a clear legal explanation.

Outcome

The practical conclusion is this: a 42-week occupancy restriction may support an SDLT reclaim argument, but only if the claim is still within the statutory time limit and the restriction is legally significant enough to affect SDLT classification.

If the purchase completed more than four years ago, the claim will usually be out of time. If the completion date is within four years, the claim may still be worth pursuing, subject to a full review of the title documents, planning position and contractual restrictions.

Practical Steps

If you are assessing your own position, the sensible next steps are:

1. Check the exact completion date of the purchase.
2. Count four years from that date to see whether a reclaim is still in time.
3. Gather the core conveyancing documents, including the TR1, contract, SDLT5 and completion statement.
4. Obtain the title register and any lease, transfer covenants, site rules or planning conditions.
5. Identify the exact wording of any occupancy restriction, especially any clause limiting use to holiday occupation or part-year occupation.
6. Consider whether the restriction is legally enforceable, not just a site policy or informal statement.
7. Prepare a clear explanation of why the property was arguably not chargeable as ordinary residential property for SDLT.
8. If relying on disrepair or unsuitability instead, assess the evidence carefully against the high threshold confirmed in Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Conclusion

A holiday bungalow subject to a strict 42-week occupancy restriction may give rise to an SDLT reclaim argument, but the claim must be made in time and supported by the legal documents. The first question is always the completion date. If the case is still within four years, the next step is to examine the enforceable restrictions in detail and assess whether they genuinely affect the SDLT classification of the property.

Legal References Used

• Finance Act 2003
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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