HMRC has issued a warning to home buyers and property professional about ‘scams’ involving firms offering to reclaim Stamp Duty Land Tax (SDLT) in return for a share of the reclaimed fee, claiming the properties are subject to exemptions on the basis they are ‘uninhabitable.’
A recent Court of Appeal ruling in Mudan & Anor v HMRC has reinforced HMRC’s long-standing position that properties requiring repair or modernisation are still subject to residential rates of SDLT; reiterating the point that a property’s physical condition alone does not determine its SDLT status. If a building retains the essential characteristics of a dwelling and has previously been used as such, it remains classified as residential—even if it requires significant work to bring it up to modern standards.
The warning comes as HMRC says it continues to receive ‘spurious SDLT repayment claims’ for refunds from buyers. Anthony Burke, HMRC’s Deputy Director of Compliance Assets, said:
“The Court of Appeal’s decision is a major win, protecting public funds. Homebuyers should be cautious of allowing someone to make a Stamp Duty Land Tax repayment claim on their behalf. If the claim is inaccurate, you could end up paying more than the amount you were trying to recover.”
The First-tier Tribunal (FTT) decision of Mudan [2023] addressed the issue of whether a house, in poor condition but which had been recently occupied, was suitable for use as a dwelling, and residential. Despite an appeal to the Upper Tribunal (Mudan [2024] UKUT 00307) the initial decision was upheld that a property would be residential even if, in its condition at completion, it would have been dangerous to occupy. It did not matter that it was not ready for immediate occupation reaffirming the position there should be a focus on the “fundamental characteristics” and nature of a building over a period of time, rather than a snapshot of habitability at the effective date.
A subsequent Court of Appeal decision firmly dismissed the appeal, finding that the Upper Tribunal decision was legally sound, and that the principles laid down in that decision are practical and workable.
In October 2024 The Law Society issued a similar note warning the profession of ‘spurious’ claims and agents ‘pushing boundaries’ when it comes to SDLT claims and repayment. Companies with little to no expertise, use Land Registry records to identify potential properties and reach out directly to home owners offering advice on how to claim reliefs associated with chattels apportionment, properties ‘not suitable for use’ and ‘communal facilities’.
