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Kirk Rice Blog

Non-resident Stamp Duty Land Tax (SDLT) surchargeWritten on May 20, 2021 by Kirk Rice LLP

Non-resident Stamp Duty Land Tax (SDLT) surcharge
Taxing Times Questions

The Question:

I plan to invest in residential property and have been told that my residence status may affect the amount of Stamp Duty Land Tax (SDLT) I must pay. How can I work out if this is relevant to me?

Kirk Rice LLP answers:

For purchases of freehold and leasehold residential properties in England and Northern Ireland from 1 April 2021, a 2% SDLT surcharge is applied where the purchaser is a non-UK resident. The surcharge is applied in addition to the various other rates that already apply, for example, the 3% additional dwelling supplement.

For residential property transactions, it is now necessary to consider the residence of the purchasers to determine whether the surcharge will apply. This process can be complicated where the purchaser is a corporate or other entity. It is also worth noting that the residence test to be applied is new and is not the same as the residence rules that currently apply to other taxes.

The surcharge will apply where one or more of the purchasers is non-resident, and the test for residence will depend on the type of purchaser. A summary of the rules is discussed below.

In the case of individuals, each person will be treated as a UK resident if they have been in the UK for at least 183 days in any continuous period of 365 days, falling within the two-year window beginning 364 days before the purchase and ending 365 days after it. In the case of joint purchasers, the surcharge will apply if only one of the individuals is a non-resident.

Employees of the Crown living and working overseas are exempt from these rules.

For corporate purchasers, the company will be non-resident where either (i) it is non-resident for the purposes of UK corporation tax or (ii) it is UK resident for corporation tax but is a close company that is directly or indirectly controlled by one of more non-UK residents. Broadly speaking, a company will be a close company if it is controlled by five or fewer shareholders.

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Partnerships are liable to pay the surcharge where one or more of the partners are non-UK resident.

As noted above, the surcharge is only applied to the purchase of residential properties. In some instances, it will not be clear whether the property is, in fact, residential, and therefore, further work will be required to determine this. For example, uncertainty may arise where mixed-use property is being acquired.

As is the case for all transactions, it is necessary to file the SDLT return and pay the SDLT due within 14 days of the transaction. If it is not clear at this date whether the non-resident surcharge will apply, the taxpayer is expected to file on a prudent basis and, if necessary, file an amended return at a later date to claim a partial refund.

All those investing in UK residential property should therefore be considering their residence status under these rules. In particular, in the case of corporate purchasers, it may be necessary to review the ultimate ownership and control of the company.

Any reader interested in discussing how the non-resident SDLT surcharge and how it may affect you should email info@kirkrice.co.uk to arrange an appointment with one of our specialists.

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Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. Tax treatment is based on individual circumstances and may be subject to change in the future. Information is based on our current understanding of taxation legislation and regulations. Any levels and bases or, and reliefs from taxation, are subject to change. The Financial Conduct Authority does not regulate tax planning.

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