Stamp Duty for Non-Residents

Author

Rohan Manro

A tax adviser, Rohan successfully completed and passed his final CTA examinations (Advisory & Application and Interaction for owner-managed businesses).

Non Resident Property Purchases – The 2% Surcharge

What is the non-resident 2% surcharge?

From April 2021, non-residents purchasing UK residential property will be subject an additional 2% of SDLT on top of the existing rates. Where the purchase will result in the non-resident investor having an interest in another residential dwelling, the 2% non-resident surcharge will apply in addition to the existing 3% surcharge for additional dwellings.

A summary of the main changes to the rates are listed in the table below:

Basic Rate

Foreign Investors (from April 2021)

Rates for additional dwellings

Foreign Investors (from April 2021)

Up to £125,000

0%

2%

3%

5%

The next £125,000

2%

4%

5%

7%

The next £675,000

5%

7%

8%

10%

The next £575,000

10%

12%

13%

15%

Any amount over £1,500,000

12%

14%

15%

17%

The surcharge will also apply to certain corporate bodies purchasing property worth more than £500,000 resulting in a flat-rate SDLT charge of 17%. However, it should be noted that there are several exceptions to this rule.

Who is non-resident?

There are detailed rules applying to specific types of purchasers. However, the basic rule for individuals and companies are broadly as follows:

  • Basic rule for individuals – An individual who is not present in the UK for at least 183 days during any continuous 365-day period which begins a year immediately before the transaction and ends a year immediately after the transaction (see diagram below)
  • Basic rule for companies:
  1. i) a company resident which is not resident in the UK for corporation tax purposes; or
  1. ii) A company which is resident in the UK, but which is majority owned by overseas persons or companies

Special rules will apply to certain types of purchasers such as trustees, partnerships, institutional investors, quoted companies, OEICs, Co-ownership authorised contractual schemes, collective investment schemes those employed by the Crown.

Why has the Non-UK Resident Surcharge Been Introduced?

This measure is intended to promote homeownership in the UK by reducing demand (and therefore prices) of UK property and using the revenues to tackle homelessness and rough sleeping in the UK.

Foreign investors play a large role in the UK housing economy, often purchasing property off-plan or developing property and selling these to UK individuals as part of a sub-sale agreement which shifts the SDLT liability to the UK purchaser.

The legislation does not appear to bring such transactions within the scope of the rules and is therefore failing to address a large chunk of the property activity which is undertaken by foreign investors and which undoubtedly plays a role in the upward drive of property prices.

How Can We Help?

The new surcharge for non-residents introduces a number of complex tests and criteria which non-resident investors and developers will need to consider both as part of their decision to purchase residential property in the UK and to ensure they remain compliant with the regime.

The ‘special rules’ which apply to specific types of purchaser are highly complicated and their application may cause confusion and/or overpayments in SDLT and this is something that we can help you and your clients plan for.

There are also potentially several circumstances which could involve non-residents accidentally overpaying SDLT or becoming entitled to a refund after the transaction has taken place. ETC Tax can help resolve any issues and making a refund claim to HMRC.

Non Resident Tax Advice

More information on Stamp Duty and Non Resident Purchases of Property please check out the information below…

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close