From 1 April 2021, a stamp duty land tax (SDLT) surcharge comes into force for non-UK resident buyers. Philip Askew, member of our Property Section committee, reminds solicitors to stay alert
Whilst the extension to the SDLT temporary rates is welcome news to practitioners, we should also be very alert to the 2% surcharge to SDLT for non-UK resident buyers of residential property that comes into force from 1 April 2021.
The temporary SDLT rates have been extended to:
- June at £500,000 nil rate, and
- September at £250,000
Calculating the surcharge
The surcharge is assessed on a buyer’s residence for tax purposes, on a different basis to other tax residency tests.
If the buyer spent fewer than half of the nights in the UK over the previous 12-month period, the surcharge would apply. The extra 2% is levied on top of the standard rates of tax.
The exact wording of the manual states: “For the purposes of the surcharge, an individual is UK resident in relation to a chargeable transaction, if the individual is present in the UK on at least 183 days during any continuous 365-day period that falls within the ‘relevant period’.
“The relevant period:
- begins with the day 364 days before the effective date of the transaction (paragraph 4(2)(a)); and
- ends with the day 365 days after the effective date of the transaction (paragraph 4(2)(b)).”
A buyer may claim back the 2% surcharge if they become UK resident within the 365 days following completion.
Buyers affected by the surcharge
For joint purchasers, if any one purchaser fails the residency test, the surcharge applies. This does not apply to spouses or civil partners. If one is UK resident under the test, but the other is not, they both would still qualify as UK resident for SDLT surcharge purposes.
Companies could be liable to the 2% surcharge, even if the company is a UK company, if:
- they are certain types of companies, or
- a certain proportion of shareholders are resident overseas under the above test.
The surcharge should not apply to non-residential rates, save where multiple dwellings relief is claimed.