When is a house no longer a house for SDLT residential property purposes?

The recent case of Oakwood Great Oak Ltd v HMRC [2026] UKFTT 01138 (TC) (Oakwood) shows that a building that looks like a house is not always treated as one for Stamp Duty Land Tax (SDLT) purposes.

The First-tier Tax Tribunal held on appeal that a house bought in November 2022 for £2.4m was not a “dwelling” for SDLT purposes at the date of acquisition even though it appeared intact as a physical structure (it was not at risk of imminent collapse), retained a recognisable residential layout, and was externally recognisable as a substantial detached residence. Therefore, the acquisition was subject to the lower non-residential SDLT rates, despite being used as a dwelling three to four years before the acquisition. The minimum SDLT saving arising from the application of the non-residential, rather than the residential, rates to the acquisition would have been approximately £92,000.

The Tribunal disagreed with HMRC because of the very poor state of the property. It was in a very dilapidated state and had substantial structural and safety issues as well as asbestos contamination and the Tribunal concluded it was not suitable for use as a dwelling.

The importance of the Mudan decision

This case followed the judgment in Mudan v HMRC [2025] EWCA Civ 799. That judgment confirmed that a building does not have to be immediately suitable for use as a dwelling: a distinction needs to be drawn between works needed to render a building habitable and works to be carried out to make the property a “pleasant place to live”. Additionally, factors to be considered include:

• past use of the building,
• whether the building has the fundamental characteristics of a dwelling (including the extent to which it is structurally sound),
• whether defects in the building requiring works can be remedied (including the viability of those works), and
• whether occupation of the building at the effective date would be unsafe or dangerous.

The assessment is multifactorial, and the various factors need to be considered cumulatively.

What was wrong with the property in Oakwood?

The property acquired by the taxpayer in Oakwood was constructed in the 1930s as a substantial dwelling house, with a two-storey extension added in the 1960s. By the time of the acquisition, however, prolonged vacancy and a lack of maintenance had left the property in a substantially deteriorated condition, beyond ordinary dilapidation arising from age or a lack of modernisation. The extensive asbestos in the property would have been disturbed by the substantial works required before the property could safely be occupied, rendering it unsuitable for immediate occupation. The question was whether, viewed objectively, the property retained the characteristics and identity of a dwelling and, considering those characteristics, was suitable for use as a dwelling at the time it was acquired.

In reaching its decision that the property was not a “dwelling”, the Tribunal applied the multi-factorial test in Mudan. In addition to the widespread asbestos contamination, the Tribunal noted the substantial structural defects in the property, the safety concerns, and the exceptionally extensive and intrusive nature of the building remediation works, as well as their complexity, and the potential risks that carrying out those works would pose to elements of the existing structure of the house. Together, these problems fundamentally altered the character and identity of the property. With unlimited time, resources and expenditure, it would theoretically have been possible to remedy those defects. However, this was not, in the Tribunal’s view, the correct approach to the test, given that, in theory, any standing structure could be said to be capable of repair. Therefore, the Tribunal rejected that interpretation of Mudan, finding that it would render the statutory test for suitability as a dwelling meaningless.

Given Mudan, the Tribunal did not outline criteria to determine where the line dividing residential from non-residential property lies. The Tribunal did note, however, that at the time of the acquisition, the property was not merely a dwelling awaiting renovation or an unmodernised property requiring substantial refurbishment.

Mudan set a high bar for the lower SDLT non-residential rates to apply to the acquisition of an unconverted building last used as a dwelling. However, it is clear from the Oakwood case that the physical trappings or characteristics of a dwelling may not be sufficient to determine whether an empty building is a dwelling where it is in poor condition and there are material safety concerns relating to occupation of the building. The key is whether the building has deteriorated to such an extent that it has lost its character and identity as a dwelling at the effective date for SDLT. Where an empty building is, at the time of the acquisition, recognisable as a residence but has become a hazard, with the result that occupation of the building would be unsafe without substantial remediation, there could be grounds for the significantly lower non-residential SDLT rates to apply.

In Bewley Ltd v HMRC [2019] UKFTT 65 (TC), on which the taxpayer in Oakwood relied, the extensive presence of asbestos in the property was a major factor in the property not being treated as a dwelling. Given the significance also attached by the Tribunal in Oakwood to the asbestos contamination throughout the property, the extensive presence of asbestos (or any other potentially dangerous substance) in a property may be a relevant factor in considering whether the property is a dwelling for SDLT purposes.

If you have questions or concerns about SDLT, please contact Michael Fluss.