SDLT proposed surcharge on purchases by non-residents

The Government is currently in consultation to bring in an additional 1% Stamp Duty Land Tax (“SDLT”) surcharge against non-UK residents buying residential properties in England and Northern Ireland.  If approved, the surcharge will apply to both individuals and companies (as well as partnerships and trusts), albeit with differing qualifying criteria.  The Government has pledged to put all the proceeds from this additional levy towards tackling rough sleeping, acknowledging that far more needs to be done to help alleviate this growing concern.  The surcharge is also intended to combat rising house prices in the UK and, in particular, to help first-time buyers get on the ladder.

The proposals are summarised below:

Individuals:

• will be non-resident if they spend fewer than 183 days in the UK in the 12 months ending with the completion/exchange date (typically the former);
• will be subject to the surcharge on top of whatever rates would otherwise be payable – including first time buyer relief rates, second home rates and rents in leasehold acquisitions

Companies:

• will be non-resident if they are not incorporated in the UK or their central management and control is not exercised in the UK (at the time of purchase).  They will also be non-resident if it is a close company that is under the direct or indirect control of another non-UK resident though this will not apply to Unit Trusts or co-ownership authorised contractual schemes;
• will also be subject to the surcharge on top of the 15% flat rate (i.e. 16%), though non-resident companies should still be conscious of the various reliefs that are available in certain circumstances (such as group relief or charities relief).

Partnerships:

• will be subject to the surcharge if any one of the partners is a non-UK resident

Trusts:

• will have to pay the surcharge if the beneficiary of a bare trust is non-resident.  There are some further detailed rules for various trust arrangements which are beyond the scope of this note.

Below is a table showing the new rates proposed by the consultation: