Non-UK Resident Stamp Duty Land Tax

Non-UK Resident Stamp Duty Land Tax

On 1 April 2021, the UK government introduced new rates of Stamp Duty Land Tax (SDLT) for non-UK residents buying residential property in England and Northern Ireland (not Scotland or Wales).

It is important to note that nationality, citizenship or residence status under the UK Statutory Residence Test are not applicable in this situation and the test used to establish if the buyer is non-UK resident for the terms of the transaction will depend on who the buyer is. ‘Right to reside in the UK’ status or any of the UK’s visa policies, including those for British National Overseas passport holders also do not apply when establishing if the purchaser is a UK resident for the property transaction.

The rates, which are 2% higher than those UK residents pay, apply to purchases of both freehold and leasehold property, and also increase the SDLT payable on rents on the grant of a new lease. The higher rates also apply to some UK resident companies that are controlled by non-UK residents. It does not apply to purchases of non-residential property or mixed transactions unless Multiple Dwellings Relief is claimed. Relief is available subject to certain conditions and there are some circumstances when the surcharge will not apply.

The 2% surcharge applies in addition to the other residential rates of SDLT, including zero rates and rates for first time buyers, purchasers of additional dwellings, purchases made by companies or where the consideration exceeds the higher rate threshold.

Therefore, the non-UK resident SDLT liability is currently calculated as follows (until 30 June 2021):

  • 2% up to £500,000
  • 7% of £500,001 to £925,00
  • 12% of £925,001 to £1,500,000
  • 14% of the remaining amount (the portion above £1.5 million)

What property does this apply to?

The surcharge will apply to all purchases of property priced above £40,000 by non-UK residents, even if you plan to live in the property you’re buying. Already owning other residential property in England and Northern Ireland does not exempt you from the surcharges.

If the contract has either been entered into and substantially performed before 1 April 2021 or exchanged before 11 March 2021, the surcharge will not apply.

If you are buying a leasehold property, the surcharge will apply if:

  • the lease premium is £40,000 or more, or the relevant rent is £1,000 or more
  • one or more buyers is non-UK resident in relation to the transaction
  • the major interest (freehold or leasehold ownership of the property, including an undivided share in a major interest in the property) being acquired is not a lease with 7 years or less to run

It does not apply to property you lease if your lease is for 7 years or less, on the date it was granted.

The surcharge does not apply to transactions on any buildings or structures in the garden or grounds of a property (e.g. a detached garage) if the actual residential property is not being purchased. It may apply to off-plan purchases.

It also does not apply to purchases of property, or part of a property, if the property is either a:

  • non-residential property
  • mixture of residential and non-residential, for example, a shop with a flat above it, unless a claim to Multiple Dwellings Relief is made

Are you affected?

The key date used to establish residence status is known as the ‘effective date of the transaction’ which is usually the date of completion, but may be the date of substantial performance of the contract if this is different. Where this is the case, HMRC should be notified of the later completion of the contract for SDLT purposes, but will only be a non-resident transaction if the substantial performance of the contract was a non-resident transaction.

To establish if you will be affected by the surcharge, you should apply the following residence tests in relation to the transaction.

You are deemed to be non-UK resident in relation to the transaction if you have spent less than 183 days in the UK (including Scotland and Wales) in the 12 months prior to the purchase. An individual is considered present in the UK on a particular day if they are situated in the UK at the end of that day.

The surcharge applies to each person, natural and non-natural, buying the property. Therefore, if any of you are deemed non-UK resident for the transaction, then all buyers are treated as non-UK resident in relation to the transaction.

It may be possible to claim a refund of the 2% surcharge if you subsequently meet the residency requirements within 12 months of the effective date of transaction.

If you are buying the property with your husband, wife or civil partner, you are both treated as UK resident in relation to the transaction if one of you is UK resident, and as long as you are not separated and neither of you is acting as a trustee of a settlement.

Can I get a refund?

You can claim a refund of the surcharge if, following the purchase, you are then present in the UK for at least 183 days during any continuous 365-day period that falls within 2 years:

  • beginning 364 days before the effective date of the transaction
  • ending 365 days after the effective date of the transaction

This is only applicable if all buyers are individuals and satisfy this residency rule, although the continuous 365-day period does not have to be the same for each buyer.

Evidence of UK presence

Many seafarers may already have comprehensive records of time spent outside the UK to claim Seafarers Earnings Deduction on their tax returns, but may not have similar records to prove they were present in the UK. If you wish to avoid the surcharge, you may want to consider pulling together the following information that HMRC may request to support any claim for UK residency in relation to a property transaction:

  • credit card and bank statements which indicate place of the purchaser’s day by day expenditure
  • work diaries or planners, including timesheets or rosters
  • mobile phone usage and bills pointing to the individual’s presence in a country
  • general overheads, for example, utility bills which may demonstrate that the individual has been present in the UK, for example, telephone bills or energy bills
  • membership and usage of clubs, for example, sports, health or social clubs

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