Amarjeet and Tajinder Mudan v The Commissioners for HMRC

For SDLT purposes, whether a building is “suitable for use as a dwelling” is a fact-sensitive question of suitability, not a requirement of immediate habitability. The court may consider the building’s history, present physical character and whether it retains the fundamental characteristics or identity of a dwelling. Necessary repairs and renovation do not necessarily remove residential status. Their extent, collective impact, safety, structural implications and capacity for remedy must be assessed. The statutory definition creates two mutually exclusive, broad categories: residential and non-residential property. The assessment is not confined to a snapshot at completion. A building remains residential property unless the works or other changes have deprived it of the character or identity of residential property.

The appellants purchased a large detached house on 5 August 2019. It had recently been used as a dwelling and was structurally sound, but required extensive works, including rewiring, replacement of the boiler and pipes, repairs to leaks, replacement of the kitchen, repairs to windows and doors, and clearance of rubbish.

The First-tier Tribunal held that the property was residential property for the purposes of the Finance Act 2003, and the Upper Tribunal upheld that conclusion at [2024] UKUT 00307 (TCC). The issue before the Court of Appeal was whether the property was “suitable for use as a dwelling” under section 116(1)(a), so that the higher residential SDLT rates applied, or whether it included non-residential property and fell within the lower rates.

1. Appeal dismissed. The property was residential property at the effective date, and the Upper Tribunal’s decision was legally sound.
2. Statutory language must be interpreted in its statutory context and in light of legislative purpose. The definition in section 116 of the Finance Act 2003 concerns land use rather than occupation alone. The Act establishes mutually exclusive and necessarily broad categories of residential and non-residential property.
3. “Suitable for use as a dwelling” does not mean “suitable for immediate use” or “ready for immediate occupation”. The court is not confined to a snapshot at completion. It may consider the building’s previous use, history, present physical character and whether it retains the identity or fundamental characteristics of a dwelling.
4. Whether works deprive a building of residential status is a question of fact and degree. The necessary works must be considered collectively. Relevant considerations include whether the building has previously been used as a dwelling; its structural soundness and fundamental characteristics; the distinction between works needed for habitability and works merely improving comfort; whether defects are capable of remedy; whether the works can be carried out without danger or prejudice to structural integrity; and whether occupation at the effective date would be unsafe. Unsafe occupation or extensive repairs do not, by themselves, make a building unsuitable.
5. The expressions “minor repair” and “fundamental works” are not reliable free-standing tests. The ultimate question is whether the works mean that the building no longer has the characteristics of a dwelling at the effective date. The Upper Tribunal’s practical guidance was approved. On the findings, the house was structurally sound, retained its residential character, and the required works did not deprive it of that character.
6. The court cautioned against transferring isolated words from authorities decided under different statutory provisions and legislative purposes. The external materials relied on by HMRC were not necessary to decide the appeal.

• Court of Appeal (Civil Division): appeal dismissed. The court upheld the Upper Tribunal’s decision at [2024] UKUT 00307 (TCC).
• Upper Tribunal (Tax and Chancery Chamber): upheld the First-tier Tribunal’s conclusion that the property was residential property for SDLT purposes.
• First-tier Tribunal: held that the property was residential property at the effective date in [2023] UKFTT 317 (TC).