SDLT surcharge

Stamp Duty Land Tax (SDLT) is a tax which is payable to HMRC when a residential property in England or Northern Ireland is purchased. The regime has become very complex in recent years and property professionals originally breathed a sigh of relief in July 2020 when the Chancellor announced a SDLT holiday to 31 March 2021 which resulted in a significant proportion of conveyancing transactions not being liable to the payment of SDLT.

Conveyancing lawyers quickly realised that the SDLT holiday certainly did not mean a holiday for them because it led to a significant increase in the number of conveyancing transactions, all trying to complete before 31 March 2021 to take advantage of the so-called SDLT holiday. At the time of writing, it is still unclear whether the Chancellor will be minded to extend the SDLT holiday.

Conveyancing lawyers and their clients could therefore be forgiven for not noticing the fact that the non-UK resident SDLT surcharge will be introduced on 1 April 2021.

This means that from this date, on the purchase of a residential property, a UK non-resident will pay a 2% SDLT surcharge. Buyers of residential property in England and Northern Ireland who are not resident in the UK will pay SDLT at a rate 2% higher than those applying to purchases made by UK residents.

The significance is that when instructing a conveyancing lawyer, buyers will have to declare whether they are non-resident. Those who have more complex affairs or are regularly in and out of the UK may require additional advice and incur extra costs to determine their tax liability. It may also be possible for a buyer to claim a refund after a purchase has completed dependent on the number of days they are present in the UK.

The residency rules applicable to SDLT are different from residency rules which apply to other taxes. It may even be possible for an individual to be considered a UK resident for SDLT purposes but not in relation to their personal taxes.

It will be important for those affected to take early and comprehensive advice. Under or over payments could be costly.

To discuss this or any property related matter, contact us.

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