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SDLT Consultation: Surcharge for non-UK residents

SDLT Consultation: Surcharge for non-UK residents

Posted on 27 February 2019

As announced in the Budget 2018, the government has published its consultation on the proposed 1% additional rate of Stamp Duty Land Tax (SDLT) for non-residents buying residential property. The new surcharge will apply on top of the "additional 3%" slice rates and the 15% flat rate for companies, where applicable. This means that the top rate of SDLT would become 16%. The consultation ends on 6 May 2019 and will then "be legislated for in a future Finance Bill". So, in theory, the new rules could come into force later this year after revelation of the 2019 Budget.

The 1% surcharge will apply to purchases of residential property by non-UK resident individuals and 'non-natural persons', including companies, trusts and partnerships.

An individual will be treated as non-resident for these purposes if they spent fewer than 183 midnights in the UK in the 12 months preceding the effective date of the transaction (usually completion). If a person paid the 1% surcharge but then exceeded the 183 midnights cap, they can claim a refund of the surcharge.

For companies, the rules will follow the usual tests for corporate tax residence, so will catch non-UK incorporated companies whose "central management and control" is based outside the UK. In contrast, a UK resident company (i.e. one which is UK incorporated, or a non-UK incorporated company that is managed and controlled from the UK) would not on the face of it be caught by the surcharge. However, the government is still looking to catch non-UK resident persons who acquire dwellings using UK companies, so the proposal is that if a UK resident company is "close" (broadly defined as controlled by five or fewer participators) and is under the "direct or indirect control" of a non-UK person, the surcharge still applies. It follows that 'widely held' UK resident companies will not be caught by the surcharge. It appears that UK based unit trusts and other forms of collective investment scheme will also fall outside of the surcharge.

It will therefore continue to be very SDLT inefficient for owner-occupiers to acquire homes through companies, especially as Annual Tax on Enveloped Dwellings (ATED) would apply as well.

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