Most people buying a property know that Stamp Duty Land Tax (SDLT) is payable when the purchase completes. There are a number of reliefs and, of course, the entire conveyancing profession reached fever pitch in the run up to June 2021 when significant SDLT savings could be made due to the so-called SDLT 'holiday'.
What fewer buyers are aware of is the non-resident surcharge which came into effect on 1 April 2021. From this date, different rates of SDLT apply to buyers of residential property in England and Northern Ireland who are not resident in the UK. The rates are 2% higher than those that apply to property purchases made by UK residents. The surcharge applies to purchases of freehold and leasehold property and to certain UK resident companies that are controlled by non-UK residents. The surcharge does not apply to purchases of land or buildings in Scotland or Wales.
The surcharge applies to all 'non-resident transactions', even if the buyer intends to live in the property that they are purchasing and regardless of whether or not they already own a residential property. The surcharge is payable when a major interest in a property is acquired, the price or premium for which exceeds £40,000.
The test used to establish whether a buyer is non-UK resident in relation to depends on who they are. Nationality, citizenship or residency status under the UK Statutory Residents Test not relevant for this purpose nor is 'right to reside in the UK' status.
Crucially, individual buyers are non-UK resident in relation to the transaction if they are not present in the UK for at least 183 days during the 12 months before their purchase. However, in certain circumstances it is possible to apply for a refund of the 2% surcharge.
If the transaction is a non-resident transaction, the 2% surcharge applies on top of all other residential rates of SDLT including zero rates and the rates which apply to first-time buyers, purchases of additional dwellings and purchases made by companies.
What many buyers might not be aware of at beginning of the transaction is first that they may be caught by this surcharge and second that HMRC must be notified of the transaction and any tax paid within 14 days of completion. This is a very tight timeframe.
Thus, if anyone thinks that they might be caught by these provisions, they should take detailed conveyancing and, possibly accounting advice at the earliest possible point in the transaction. A buyer would want to avoid interest and penalties in the event that the surcharge was not paid when it should have been and, conversely, would want to reclaim a refund of the surcharge if their circumstances permitted following the transaction.
To discuss this or any property related matter, contact us.