Recently, the UK Government published a consultation paper proposing yet another increase in the amounts of stamp duty land tax (SDLT) payable on the purchase of English and Northern Irish residential property.

The SDLT system currently does not discriminate between UK residents and non-UK residents, but according to the consultation paper “there is evidence that purchases of property by non-UK residents is pushing up house prices for UK residents”. Therefore non-UK resident purchasers are targeted.

Who is non-UK resident for these purposes?

The proposal is that any individual who spends fewer than 183 days in the UK in the 12 months prior to the “effective date” of the transaction (usually the date of completion) will be treated as non-resident for the purposes of the 1% surcharge. A day in the UK will only be counted as such if the individual is present in any part of the UK at midnight.

Is a purchasing vehicle recommended instead?

That will sadly not work. Purchases by the following vehicles will also be caught:

  • non-UK resident companies, unit trusts and authorised contractual schemes;
  • UK resident closely held companies (broadly, those controlled by 5 or fewer unconnected participators) which are controlled by non-UK residents;
  • partnerships where any one of the partners is non-UK resident;
  • discretionary trusts which are non-UK resident (the test for which looks principally at the residence of the trustee(s)); and
  • interest in possession trusts where the individual life tenant is non-UK resident.

Any reliefs available?

The government does not intend to introduce any reliefs other than a narrow relief for Crown employees. Therefore, individuals and companies purchasing UK residential property to use in rental businesses or other trades will face the 1% surcharge.

If you move to the UK:

If an individual suffers the surcharge on a purchase and then spends 183 days or more in the UK in the following 12 months, they will be eligible for a refund.

The flat 15% rate and the 3% surcharge

Purchases of dwellings worth in excess of £500,000 by non-natural persons (such as companies and unit trusts) are subject to a flat 15% rate of SDLT unless relief can be claimed by the buyer. This 1% surcharge will sit on top of the 15%, meaning that the flat rate increases to 16%.

The 1% surcharge also sits on top of the existing 3% surcharge.

When will this take effect?

The consultation runs until 6 May and declines to give a date for implementation, stating merely that this will be legislated for in a future Finance Bill – so perhaps 1 April 2020.

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