New stamp duty surcharge from 1st of April 2021



From 1st April 2021, all “non-UK residents” purchasing a residential property in England & Northern Ireland, will be subject to a 2% Stamp Duty Land Tax (SDLT) surcharge. This will not apply to property Scotland and Wales. The term “non-UK resident” is still being questioned by many.

In very basic terms, a person not a resident in the UK for purposes defined by Her Majesty’s Revenue & Customs (HMRC) or a person not treated as being a resident of the UK, will be calculated to pay an additional 2% in tax on certain residential property purchases/acquisitions.

This rule will only apply to residential property transactions and at this stage, not to commercial property. As such, this may leave scope for people to argue whether a property is a “dwelling” or “suitable for residential purposes” when purchasing a non-standard property. Similarly, questions may be raised on “mixed use” properties.

The rules around “non-UK resident” are complex and will depend on the actual purchaser. The 2% additional SDLT payment will apply to:

  1. An individual who has spent less than 183 days in the UK in the 12 month period prior to the date of completion of purchase/acquisition.
  2. If an individual acquiring the property, is moving to the UK at the time, then they will have to pay the 2% surcharge initially. Upon proving they have lived in the UK for 183 days in any 365 day period, within the timeframe of 12 months before the completion date and 12 months after the completion date, they can claim back the 2% surcharge paid from HMRC.
  3. A company purchaser, will need to be both incorporated in the UK and have its central management and control exercised in the UK at the time of any property purchase/acquisition to enable them to not have to pay the 2% surcharge. If the company is under the control of “non-UK residents” or the operations are based outside of the UK, then the company purchaser will have to pay the 2% surcharge on top of any additional SDLT they already have to pay.
    There are certain exceptions to this rule, such as for open-ended investment companies (OEICs) and real estate investment trusts (REITs).
  4. A partnership will pay the 2% surcharge if any one of the partners are “non-UK residents” regardless of how small their holding/interest in the property is to be.
  5. For joint purchasers, if one of those joint purchasers were “non-UK residents” then the 2% surcharge will be payable. However, if the joint purchasers were a married couple or in a civil partnership and jointly purchase/acquire the property and both purchasers lived together, then the 2% surcharge will not apply as long as one of those purchasers were a UK resident and not acting as a trustee.
  6. If there is a trust set up for the benefit of a “non-UK resident”, then the 2% surcharge will apply.

There are also exceptions to the rules where the individual is an employee of the Crown and is based outside of the UK as part their employment.

In circumstances where the purchaser becomes entitled to a refund of the 2% surcharge SDLT paid, they can apply to a refund within 2 years of the completion date of the transaction.

No doubt the above mentioned rules, will raise more questions and another layer of complexity to an already complex tax system with residential property transactions. As such, for those who do think they may be affected, should take separate tax advise at the time of considering purchasing/acquiring a residential property as well as instructing a Solicitor to deal with the transaction.

If you would like advice on these points, please contact Kathryn Frisby at Borneo Martell Turner Coulston Solicitors [email protected] 01604 622101