Draft legislation has been published in respect of the proposed 2% Stamp Duty Land Tax (SDLT) surcharge on non-UK residents purchasing dwellings in England and Northern Ireland with effect from 1 April 2021.
Updated 17 September 2020
Who is affected?
The surcharge will apply on completing the purchase, or entering into a lease, of a dwelling or dwellings in England and Northern Ireland on or after 1 April 2021. Wales and Scotland are not covered by the proposals, but may well follow suit.
Transitional rules will apply where a contract is substantially performed before 1 April 2021 (which normally determines when SDLT is due), but does not actually complete until 1 April 2021 or later. However, the surcharge does not apply to a transaction under a contract entered into before 11 March 2020, unless, on or after that date, it is varied (effected by exercise of an option or assigned to another).
The surcharge will apply to:
- non-UK resident individuals,
- non-resident companies (other than OEICs and UK REITs),
- non-resident trusts,
- some UK resident trusts and
- some UK resident close companies.
A UK-resident close company will be affected if, at the point it acquires a dwelling or dwellings, it is a close company under the direct or indirect control of one or more non-UK resident persons.
Partners, other than civil partners, are to be ignored when attributing rights and powers of others in determining a person’s control of such a company. A company is to be deemed close if it is under the control of any number of non-residents.
A partnership will be affected if a non-resident is one of the partners. A trust will be treated as non-resident if a beneficiary of a trust with an interest in possession is not UK resident.
Where there are two or more individual purchasers (and two are spouses or civil partners of one another who are living together at the effective date of the transaction), if either is UK resident then both will be treated as UK resident.
Residence test for individuals
The Statutory Residence Test will not be used.
In the cases described below, an individual will be treated as a UK resident in relation to a chargeable event if he or she is present in the UK on at least 183 days during the 365 days ending with the date the transaction occurs:
A: If the purchaser is, or (if there is more than one) the purchasers include, a company or a person acting as trustee of a unit trust scheme;
B: If the purchaser is, or (if there is more than one) the purchasers include, an individual treated as entering into the transaction for a partnership; or
C: If the purchaser is, or (if there is more than one) the purchasers jnclude, an individual who is acting as a trustee of a settlement and under the terms of the settlement there is no beneficiary with an interest in possession.
Otherwise, individuals will be treated as UK resident for the purposes of the surcharge if they are present in the UK on at least 183 days during any continuous period of 365 days that falls within the ‘relevant period’. The ‘relevant period’ is the 365 days ending with the date the transaction occurs and the following 365 days.
If it is not yet clear that an individual is UK resident when the SDLT return is delivered, the return must be completed in the first instance on the assumption that the individual is non-resident.
An individual is treated as being present in the UK on a day if present at the end of that day.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary. If you would like advice or further information, please speak to your usual Shipleys contact.
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