Uninhabitable or just dilapidated? What the Court of Appeal actually decided in Mudan
A cold offer arrives saying the wreck you bought was never residential property and HMRC owes you thousands. Since the Court of Appeal decided Mudan in June 2025 that argument is far narrower than the marketing suggests. Worse, the prize is not what people assume: for an ordinary home between £250,000 and £925,000 it is exactly £500, and on the same house completed between 23 September 2022 and 31 March 2025 it is not a prize at all but a £2,000 increase. Here is what the case decided, the narrow gap Bewley still occupies, the first purchase to get through it since, and HMRC's own case study of a homeowner left worse off than if nobody had called.
Work out what the argument is worth first, and check the completion date before you do
The whole dispute is about which of two tables in section 55 of the Finance Act 2003 applies. Table B, for anything that is not wholly residential, charges nothing to GBP 150,000, 2 per cent to GBP 250,000 and 5 per cent above. Table A, for residential property, currently runs nothing to GBP 125,000, 2 per cent to GBP 250,000, 5 per cent to GBP 925,000, 10 per cent to GBP 1.5 million and 12 per cent above. There is no relief and no apportionment: a single non-residential element switches the entire consideration onto Table B. Put a price through both. On a GBP 600,000 house bought as a main residence, Table A gives GBP 20,000 and Table B GBP 19,500. On a GBP 900,000 house it is GBP 35,000 against GBP 34,500. The entire prize is GBP 500, and it is GBP 500 for every price between GBP 250,000 and GBP 925,000, because across that range both tables charge 5 per cent and the only difference is GBP 25,000 of nil band. Above GBP 925,000 the gap opens, because Table A moves to 10 per cent and Table B stays at 5. Now the point almost nobody makes. Overpayment relief runs four years from the effective date, so a claim made today reaches back to purchases completed in September 2022, and for effective dates from 23 September 2022 to 31 March 2025 Table A was different: nil to GBP 250,000, then 5 per cent, with no 2 per cent band at all. Across that same GBP 250,000 to GBP 925,000 range Table B was therefore GBP 2,000 more expensive, not GBP 500 cheaper. On a GBP 600,000 house completed in 2023, a successful non-residential argument increases the tax by GBP 2,000. Roughly the first two and a half years of the still-open claim window sit in that period.
Where the money actually is, and it is not the ordinary home
The GBP 500 figure is the answer for a buyer on the standard table, which is to say somebody buying a home to live in and replacing nothing. The buyers who receive these approaches are usually not that person. Take completion on or after 1 April 2025 first. On a GBP 600,000 purchase attracting the higher rates for an additional dwelling the tax is GBP 50,000 against Table B's GBP 19,500, so the argument is worth GBP 30,500. At GBP 1,100,000 it is GBP 108,750 against GBP 44,500, a difference of GBP 64,250. For a company buying a single dwelling above GBP 500,000 and not qualifying for the property rental business relief, the flat rate of 17 per cent on GBP 1,100,000 is GBP 187,000 against GBP 44,500, a difference of GBP 142,500. Now apply the same discipline as before, because these figures move with the date too, and they move a long way. The additional dwellings surcharge was 3 percentage points rather than 5 for every effective date up to 30 October 2024, and the company flat rate was 15 per cent rather than 17. Sitting those on the nil band that then ran to GBP 250,000, the GBP 600,000 second home completed in 2023 bears GBP 35,500 rather than GBP 50,000, so the argument is worth GBP 16,000 and not GBP 30,500. The stakes are real, they are concentrated in exactly the transactions where HMRC looks hardest, and every one of these numbers has to be computed on the rates in force at the effective date rather than lifted from a page written this year. None of it bears on whether the argument is right.
What the Court of Appeal decided in Mudan
Mr and Mrs Mudan bought a house in south east London in August 2019 and paid stamp duty land tax on the residential table as modified by Schedule 4ZA, that is at the higher rates for an additional dwelling, which is why roughly GBP 100,000 turned on the answer. They later claimed part of it back on the basis that the property had not been residential property at all. It needed complete rewiring, a new boiler, new pumps and pipework, a new boiler-house roof, a stripped and replaced kitchen, repairs to broken windows, doors and locks, and the clearance of a great deal of rubbish. The First-tier Tribunal found that the house had been used relatively recently as a dwelling and was structurally sound, but was not in a state such that a reasonable buyer might be expected to move in straight away. That appeal failed, the Upper Tribunal dismissed the next one, and on 27 June 2025 the Court of Appeal dismissed the third, unanimously. The reasoning is short and hard to work around. The statutory words are used or suitable for use as a dwelling, and, as Lord Justice Lewison put it, the argument required suitable for use to be read as if it said suitable for immediate use, which is quite simply not what the definition says. The definition is concerned with the building rather than its internal fit out. A property actually in use as a dwelling is residential however dilapidated it is, so on the taxpayers' argument the answer would have turned on whether the seller happened to move out before completion rather than on anything about the property. It would be irrational to attribute to Parliament an intention that a roofless shell under construction should be residential while a complete house needing rewiring and a new kitchen was not. And the ordinary speaker of English would characterise property as residential if it is the sort of property that people live in.
The gap Bewley still occupies is real and it is very narrow
Bewley concerned a bungalow near Weston-super-Mare bought for GBP 200,000 in January 2017. Its heating system, copper pipework and floorboards had been removed, it had been empty since 2014 or earlier, and an asbestos survey had found chrysotile through the floor tiles, ceilings, wall panels, roof slates and outer wall, with a recommendation of urgent removal. The demolition contractor's evidence was that removing the asbestos cement necessitated the structure being virtually dismantled in the process. The First-tier Tribunal held the bungalow was not suitable for use as a dwelling, and the tax fell from the GBP 7,500 HMRC had assessed to GBP 1,000. Mudan did not overrule that decision. It confined it. The Upper Tribunal framework that the Court of Appeal quoted in full and endorsed runs to seven points, starting from the proposition that previous use as a dwelling is a very strong indication, and two of them decide most cases. Does the building still have the fundamental characteristics of a dwelling and is it structurally sound: is it a desirable house that has become dilapidated and needs updating, or is it an empty shell with no main roof. And are the defects requiring works capable of remedy, taking into account whether the works would be so dangerous or hazardous as to prejudice their viability, and whether they could be carried out without prejudicing the structural integrity of the building. Bewley is named in the framework as the illustration of that second limb, which is about works that cannot viably be done at all rather than about properties that are in a bad way. The framework is explicit that occupation being unsafe is not enough on its own, and offers rewiring as its own example, and that works to make somewhere a pleasant place to live do not touch suitability. Read Bewley's own reasoning and the point is clearer still: the tribunal there said in terms that the asbestos did not prevent re-occupation, and that this was not the test. What did the work was the combination of stripped-out services and asbestos that prevented any repair being carried out safely.
The first purchase to get through the gap since Mudan
Nothing comparable succeeded in the years after Bewley, which is a large part of why the argument acquired its reputation. That changed on 5 August 2026, when the First-tier Tribunal allowed the appeal in Oakwood Great Oak Ltd v HMRC, and the facts are worth knowing because they are the only current calibration point a buyer has. The company bought Great Oak, Prowse Avenue, Bushey Heath on 29 November 2022 for GBP 2,400,000. At the effective date the house had stood vacant for three to four years and had widespread damp, mould and water ingress, significant structural defects affecting retaining walls and terraces, asbestos-containing materials in numerous separate locations, and conditions that made occupation unsafe. Remediation was costed at roughly GBP 2,250,000, very nearly the purchase price again. The tribunal applied the Mudan framework, rejected the idea that theoretical remediability settles the question, and held that while the defects taken one at a time might have looked ordinary, viewed together they presented a materially different picture and the property had ceased to possess the characteristics and identity of a dwelling. Two things follow. The gap is real, so the answer is not automatically no. And the bar it sets is a vacant house needing most of its own value spent on it before anyone could safely live there, which is a very long way from a tired kitchen and a rewire.
The specific defects that do not make a house non-residential
HMRC's manual now lists them, and the list maps almost exactly onto what the marketing material claims. It covers the temporary removal of bathroom or kitchen facilities, substantial repair or replacement of windows, floors, doors or a roof, boiler and pipework replacement, unsafe electrical wiring, services requiring reconnection, pest infestation, damp proofing needs and damaged plasterboard, flood damage, repairable structural defects, and, in terms, the presence of asbestos. That last item catches people, because Bewley is remembered as the asbestos case and it was not. The manual is equally blunt about the state of the claims it receives: a very high proportion of the repayment claims HMRC receives in this area are wrong, and being suitable for use as a dwelling is not the same as being ready for immediate occupation. Three further arguments have failed at First-tier Tribunal level and are unlikely to fare better on appeal. Unmortgageability was treated as beside the point in Bewley. Fish Homes held that a failure to comply with building regulations does not by itself make a building unsuitable for use as a dwelling, and the Court of Appeal in Mudan recited that passage without criticism. And Bewley held that a planning permission to demolish, even one the seller obtained, is irrelevant, as is anything you do to the property after completion.
HMRC's own case study, reconciled to the penny
In July 2025, immediately after the Court of Appeal handed down Mudan, HMRC published a case study of a homeowner who bought for GBP 1,100,000 and paid GBP 53,750 in stamp duty land tax. Check that against Table A: nothing on the first GBP 125,000, GBP 2,500 on the slice to GBP 250,000, GBP 33,750 on the slice to GBP 925,000, and GBP 17,500 at 10 per cent on the last GBP 175,000. It comes to GBP 53,750 exactly, which tells you this was an ordinary main residence at standard rates. A repayment agent obtained GBP 9,250 back and took 30 per cent of it, leaving the homeowner GBP 6,475. Check that figure too: Table B on GBP 1,100,000 is nothing on GBP 150,000, GBP 2,000 to GBP 250,000 and GBP 42,500 at 5 per cent above, a total of GBP 44,500, and GBP 53,750 less GBP 44,500 is GBP 9,250. The published numbers reconcile. Then HMRC opened a compliance check, rejected the claim, and the homeowner had to repay the whole GBP 9,250 with interest and a penalty on top. He was left having paid the agent GBP 2,775 for the privilege of being worse off than if nobody had contacted him. The liability for an inaccurate return sits on the person who gave it, not on the agent, and the agent's fee is not recoverable from HMRC. Penalties for an inaccuracy run to 30 per cent of the tax for carelessness, 70 per cent for a deliberate inaccuracy and 100 per cent where it is concealed, reduced for disclosure, and a careless inaccuracy disclosed unprompted can come down to nothing.
The deadlines, and the order the work has to be done in
One neighbouring argument is worth a sentence, because the same approaches often bundle it. Where a house comes with land, the claim is sometimes that part of it is not garden or grounds and the transaction is therefore mixed. The Court of Appeal refused in Hyman in February 2022 to imply any limit into those words, whether by reference to reasonable enjoyment or to acreage, and HMRC's manual takes the same line: no statutory concept of reasonable enjoyment, no statutory size limit, and no read-across from the capital gains tax idea of a permitted area. A grazing lease granted around completion is evidence of the character of the land at best, and if it is contrived it is evidence of nothing. Two practical points then close the subject. All of this is stamp duty land tax, which means England and Northern Ireland; Scotland and Wales run their own land taxes on their own tables and none of the arithmetic above transfers. And three deadlines govern what can still be done: twelve months from the filing date to amend your own return, four years from the effective date to make an overpayment relief claim, which must be in writing and state the amount and the grounds, and four years for HMRC to assess, extended to six where an inaccuracy was careless and twenty where it was deliberate. So the order of work is fixed. Establish the completion date and compute both tables on the rates then in force, because the answer might be GBP 500, might be a five-figure sum on a higher rates or company purchase, and might be GBP 2,000 against you. Then work through the framework, which starts from previous use as a dwelling and turns on two questions: did the building still have the fundamental characteristics of a dwelling, or was it closer to an empty shell, and were the works genuinely incapable of being carried out rather than merely extensive. If the honest answer to the second is that the works were simply expensive, there is no claim, and the person telling you otherwise is not the one who signs the return.
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This article is general information only and does not constitute tax advice. Figures and dates are current as at the date of writing; any worked example is illustrative. Always consult a qualified adviser before acting.