Stamp Duty Land Tax (SDLT) Surcharge for Non-UK Residents

Stamp Duty Land Tax (SDLT) rates have changed again for non-residents buying a home in England or Northern Ireland.

From April 1, 2021, the Non-UK Resident Surcharge adds 2% to the general stamp duty rate paid by English and Northern Irish house buyers – Scotland and Wales have their own stamp duty rates and rules.

Non-residents will pay at least the 2% stamp duty on every home purchase as the zero-rate band does not apply to buyers located outside the UK.

More changes are on the way as Chancellor Rishi Sunak has already announced the stamp duty holiday is ending later this year. With any discounts tapering off by October 1.

This article sets out the stamp duty surcharge rules for non-residents and how the government assesses the residency status of homebuyers.

What is the SDLT Non-Resident Surcharge?

In essence, the surcharge applies an extra 2% Stamp Duty to any property purchased in England or Northern Ireland. The tariff is similar to the levy against second home purchases.

The same thresholds and regular Stamp Duty rates apply, plus the surcharge.

Stamp Duty works on an alternative basis in Wales and Scotland, so although a tax remains payable, the calculation basis and rates are different.

This new surcharge launched on 1st April 2021. It may recoup some of the potential governmental losses incurred due to the Stamp Duty holiday period, which tapers off and then ends on 30th September.

Who Does it Apply To?

• Residential property purchases, anywhere in England or Northern Ireland.
• Both leasehold and freehold properties.
• Individuals who have not been resident in the UK (in any region) for at least six months (183 days) in the last year.
• Properties purchased for £40,000 or above, including leasehold purchases or a leasehold share above this minimum.
• Some UK companies, depending on the assessed residency of the owners or controllers.
• Joint property purchases, where one of the buyers is treated as a non-resident for Stamp Duty purposes.

Transactions, including the purchase of commercial premises or mixed investments of both business and residential properties, are not liable for the surcharge.

However, property investors purchasing a mixed lot of premises and claiming Multiple Dwellings Relief will be liable if they are considered non-resident.

Does the UK Non-Resident SDLT Surcharge Apply to Commercial Purchases?

The tax residency test for the Stamp Duty non-resident surcharge operates independently of other systems - and so citizenship or nationality do not influence the outcome, nor does ownership of a valid residence permit.

Any individuals spending less than six months of the prior year in the UK are liable to pay the 2% surcharge, regardless of where they are domiciled or own their primary home.

There are different rules for commercial enterprises purchasing a residential property.

It is essential to note that the levy does not apply to business or commercial properties - it only applies to individuals, companies or other trading structures buying a residential home.

Stamp Duty Non-Resident Rules for Companies

Incorporated businesses are treated as non-residents if the corporate buyer was not a UK resident for Corporation Tax at the time of the property purchase. The rules depend on whether a non-resident controls the company, so the business can be charged the Stamp Duty surcharge if:

• They are a close company;
• The business meets the non-UK resident control test; and
• It is not an excluded company.

Partnerships must also pay the non-resident surcharge if one of the partners is a non-resident, in which case the entire transaction becomes liable.

Stamp Duty Non-Resident Rules for Trusts

Creating a trust to purchase a property is relatively common. However, the non-resident Stamp Duty charge will apply if any trustee is considered a non-resident for SDLT purposes.

Exemptions apply for:

• Bare trusts.
• Trusts where a beneficiary can remain in the purchased home for life or receive earnings generated from the property.

In these cases, the beneficiaries’ residence status will determine the Stamp Duty treatment, rather than the separate Stamp Duty Non-Resident Control Test.

It is vital to seek professional advice before proceeding with a property purchase through a trust in anticipation that the non-resident SDLT assessment will not apply.

What are the Exemptions for the Non-Resident SDLT Surcharge?

The above rules outline regulations for companies and trusts. However, some UK close companies are exempt from the non-resident Stamp Duty surcharge. These include:

• UK Real Estate Investment Trusts.
• Members of a Real Estate Investment Trust.
• Property Authorised Investment Funds.
• Corporate organisations that are a 51% plus subsidiary of a Property Authorised Investment Fund.

Other exemptions include any non-residential property, purchases completed before 1st April 2021, and where contracts were exchanged before 11th March 2020.

What Are the Stamp Duty Rates Payable in the UK for Non-Residents?

If you are treated as a non-resident for Stamp Duty, the rates you pay on a residential property purchase in England or Wales will increase by 2% above the current rate.

The below tables show the rates payable as the Stamp Duty holiday comes to an end:

Stamp Duty Rates for Residents and Non-Residents to 30th June 2021

Property Value	Stamp Duty for Residents	Stamp Duty for Non-Residents
Up to £500,000	Zero	2%
£500,001 to £925,000	5%	7%
£925,001 to £1.5 million	10%	12%
Over £1.5 million	12%	14%

Stamp Duty Rates for Residents and Non-Residents from 1st July to 30th September 2021

Property Value	Stamp Duty for Residents	Stamp Duty for Non-Residents
Up to £250,000	Zero	2%
£250,001 to £925,000	5%	7%
£925,001 to £1.5 million	10%	12%
Over £1.5 million	12%	14%

Stamp Duty Rates for Residents and Non-Residents from 1st October 2021

Property Value	Stamp Duty for Residents	Stamp Duty for Non-Residents
Up to £125,000	Zero	2%
£125,001 to £250,000	2%	4%
£250,001 to £925,000	5%	7%
£925,001 to £1.5 million	10%	12%
Over £1.5 million	12%	14%

There are also first-time buyer Stamp Duty reliefs available for UK residents. From 1st July 2021, these mean that:

• Properties purchased by first-time buyers up to £300,000 are exempt.
• Stamp Duty of 5% becomes payable on the proportion of the purchase value between £300,001 and £500,000.

The Stamp Duty surcharge for non-residents does not exclude first-time buyers. The 2% surcharge remains payable on any purchase, which would be considered exempt for a UK resident.

Is There a Rebate System for SDLT Surcharges for Non-Residents?

While the Stamp Duty control test does differ from other residency tests, such as the Statutory Residence Test, it does provide for the possibility of a rebate becoming claimable.

Many UK citizens living abroad as an expat may find that they are liable for the surcharge although they hold a British passport and have a permanent home in Britain. This rule applies if they have been overseas for six months of the year leading up to a new property purchase.

In contrast, the SRT considers multiple factors, such as:

• Amount of time spent or working in the UK.
• Connections in the country, such as family ties or businesses.
• The location of the person's main home.
• In which country the individual is considered a tax resident.

If a person is considered a non-resident for Stamp Duty, based on their time overseas in the last year, they can claim a rebate to the value of the 2% surcharge paid.

Rebates are claimable if the individual returns to the UK and remains in residence for 183 days or more of the next 12 months.

If you have any questions about the issues raised in this article, we at Key Business Consultants can help. Get in touch with us today or call us directly on 02037 282 848.