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TAX UPDATE: Stamp Duty Land Tax

Thursday 08 April 2021
TAX UPDATE: Stamp Duty Land Tax

We take a look at a new surcharge for stamp duty land tax (SDLT) that was introduced on 1st April 2021.

 

 

 

 

 

 

If you're non-UK resident and considering a UK residential property purchase it is worth understanding the new measure introduced by HMRC on 1st  April.

An increase of 2% of tax to all rates of SDLT payable on the purchase of residential property by any non-UK resident buyer will be incurred.  This includes Northern Ireland and applies to freehold and leasehold property.

Jersey resident investors should be aware of this increase and any other purchaser who is unsure of their residential status, who spends regular periods out of the UK, should clarify their position to assess whether it will affect their SDLT liability.

N.B. Where individuals pay the surcharge but then satisfy the residence conditions in the 12 months following the transaction, they may be entitled to a refund.

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Quick summary

Who does it affect?

Buyers of residential property in England and Northern Ireland who are not UK resident. 

How does it affect them?

From 1st April 2021,the SDLT they pay will incur a surcharge of 2%.

What should they do about this?

Speak to a professional advisor to confirm UK residential status and/or calculate the SDLT payable on a purchase.


What is the SDLT surcharge test?

Here are two examples of how residency is tested:

Individual

An individual is UK resident if they have been present in the UK on at least 183 days during any continuous period that:

  • Begins with the day 364 days before the effective date of the chargeable transaction, and
  • Ends with the day 365 days after the effective date of the chargeable transaction.

Therefore, there is a two year window during which the 183 day test could be met. 


Company

A non-resident company will be liable for the 2% surcharge if on the effective date of the chargeable transfer: 

  • The company is not UK resident for UK corporation tax purposes, or
  • The company is subject to UK corporation tax but it is a ‘close company’ which is controlled by one or more persons who are not UK resident (using the above SDLT test for residency) unless exemptions apply.


The contents of this document are based upon our current understanding of HMRC’s tax practice as at April 2021 which is subject to change.

More information on SDLT for non-UK residents can be found on the HMRC website 

Please contact our director, Hannah Roynon-Jones to find out what impact this could have on your future UK residential purchases.

EMAIL HANNAH

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