Amarjeet Mudan & Anor v The Commissioners for HMRC

For stamp duty land tax purposes, whether a building is suitable for use as a dwelling is a multi-factorial question directed to the building’s fundamental characteristics and nature. It is not a test of immediate occupation on the effective date.

A building recently used as a dwelling may remain residential property although repair or renovation is required. Previous use, structural soundness, the nature and collective effect of necessary works, whether defects are remediable, and any safety risk are relevant. The question is whether the works mean that the building no longer has the characteristics of a dwelling. A temporal de minimis test based on the anticipated duration of works imports an unjustified gloss on Finance Act 2003 section 116.

The appellants purchased a London property and initially paid SDLT as on residential property. They later sought a partial repayment, contending that its condition on completion meant it was not residential property.

HMRC’s closure notice rejected that contention. The First-tier Tribunal dismissed the appellants’ appeal in a decision released on 28 March 2023. It found that the property had recently been used as a dwelling and was structurally sound, but required substantial remedial works before a reasonable buyer would move in.

The Upper Tribunal considered whether the First-tier Tribunal had applied the correct meaning of a building “suitable for use as a dwelling” under Finance Act 2003 section 116, and whether its evaluative conclusion was reasonably open to it.

1. Appeal dismissed. The First-tier Tribunal made no error of law in upholding the closure notice.

2. The expression “suitable for use as a dwelling” in Finance Act 2003 section 116 is a question of law, although its application is a multi-factorial factual evaluation. Construed purposively, it concerns the fundamental characteristics and nature of the chargeable interest acquired, rather than a snapshot of whether a buyer could occupy the building immediately on completion.

3. “Use” is not synonymous with occupation. The legislation does not require a building to be ready for immediate occupation. The appellants’ proposed temporal qualification, allowing only minor works taking a few days, was rejected. It lacked statutory support, was uncertain, and could make SDLT depend on local availability of labour and materials.

4. Where repair or renovation is required, relevant matters include previous use as a dwelling, structural soundness, the works needed and their collective effect, whether defects are safely and viably remediable, and the degree of danger associated with occupation. Previous residential use is highly relevant but not conclusive. Safety concerns, including a need for rewiring, do not by themselves make a building unsuitable.

5. The ultimate question is whether the necessary works mean that the building no longer has the characteristics of a dwelling. Labels such as “minor” or “fundamental” repairs are not free-standing legal tests.

6. The First-tier Tribunal’s reasoning was consistent with those principles. It was entitled to conclude that the identified works, though preventing immediate occupation, were reparative and did not deprive the structurally sound property of its dwelling characteristics. Its conclusion was reasonably open to it.

• Upper Tribunal (Tax and Chancery Chamber): dismissed the appellants’ appeal and upheld the correctness of HMRC’s closure notice: [2024] UKUT 307 (TCC).
• First-tier Tribunal (Tax Chamber): dismissed the appellants’ appeal against the closure notice in a decision released on 28 March 2023; no citation was stated.