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SDLT Non UK Resident Surcharge Consultation
Monday 25th February 2019
HMRC has issued a consultation document and is seeking views on the introduction of a 1% SDLT surcharge on non UK residents purchasing UK residential property in England and Northern Ireland.
The non UK resident surcharge will apply to purchases of residential property made by non UK resident individuals and certain non natural persons including companies, trusts and partnerships. The surcharge will apply to freehold and leasehold purchases of residential property and will be at a rate of 1% on top of all existing SDLT rates, including the rates applicable to the rental element of leasehold property.
Whilst changes were introduced in 2016 of the higher rates of SDLT on additional dwellings, together with first time buyers’ relief in 2017, the government considers there is evidence that purchases of property by non UK residents is pushing up house prices for UK residents. In the 2018 Budget, the government announced it would consult on the introduction of an SDLT surcharge on non UK residents purchasing residential properties in England and Northern Ireland.
There will be reliefs from and refunds of the surcharge in certain circumstances where the government considers imposing a tax charge is not in line with the overall policy intention.
The government is proposing to treat individuals as non UK resident for the purposes of the surcharge if they spend less than 183 days in the UK in the 12 months ending with the date the transaction occurs. A person will be deemed to have spent a day in the UK if they are here at the end of a day (midnight).
Although SDLT is only payable on property or land purchased in England and Northern Ireland, for the purposes of the SDLT residence test it is days spent in the whole of the UK that will be relevant, not just days spent in England or Northern Ireland. Where an individual who has been subject to the surcharge spends 183 days or more in the UK in the 12 months following the effective date of the transaction, they will be eligible for a refund of the surcharge.
The surcharge will apply to non UK resident companies and certain UK resident close companies purchasing residential property in England and Northern Ireland. At present, there is no concept of corporate residence within the SDLT statute, so the government proposes to introduce a company residence test to determine liability to the surcharge. Companies will be resident in the UK for the purpose of the surcharge if they are incorporated in the UK, or at the time they acquire residential property, their central management and control is exercised in the UK.
In addition, a UK resident company will be liable to the surcharge if, at the point it acquires residential property, it is a close company under the direct or indirect control of one or more non UK resident persons. This test will not apply to non close companies or to those entities treated as companies for SDLT purposes such as Unit Trusts and co ownership authorised contractual schemes
The government also proposes that the surcharge will apply to non UK resident companies purchasing residential property that are subject to a flat rate of SDLT of 15%.
The government welcomes comments on the condoc by 6 May 2019.
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