On 8 March 2021, UK HMRC published guidance on Rates of Stamp Duty Land Tax for non-UK residents regarding the 2% SDLT increase (surcharge) that will apply from 1 April 2021 on the purchase of residential property in England and Northern Ireland by persons that are not resident in the UK, including natural and non-natural persons. The surcharge also applies to certain UK resident companies that are controlled by non-UK residents. Some of the main points of the guidance include the following:

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What property the surcharge applies to

The surcharge applies to all 'non-resident transactions', even if you intend to live in the property you're buying, and regardless of whether or not you already own a residential property.

You must pay the surcharge when you buy a major interest in a freehold residential property for £40,000 or more if one or more buyers is non-UK resident in relation to the transaction.

You must pay the surcharge when you buy a major interest in a leasehold residential property if:

• the lease premium is £40,000 or more, or the relevant rent is £1,000 or more
• one or more buyers is non-UK resident in relation to the transaction
• the major interest being acquired is not a lease with 7 years or less to run

A major interest means freehold or leasehold ownership of the property, and includes an undivided share in a major interest in the property.

The garden and grounds of the property, including any buildings or structures, for example a detached garage, are also included, along with any land that exists for the benefit of the property. However, the surcharge does not apply to a transaction in such a building or land without the purchase of the actual residential property.

In certain circumstances, the surcharge also applies to off-plan purchases.

More information can be found in SDLTM09865.

Who the surcharge applies to

The test used to establish whether a buyer is non-UK resident in relation to the transaction depends on who the buyer is. Nationality, citizenship or residence status under the UK Statutory Residence Test are not relevant for this purpose.

Similarly, 'right to reside in the UK' status or any of the UK's visa policies, including those for British National Overseas passport holders, is not relevant for the purpose of establishing whether a buyer is non-UK resident in relation to the transaction.

The 'effective date of the transaction' is the key date used to establish residence status. This is normally the date that the transaction is completed, but will be the date of substantial performance of the contract if this is different. In such cases, the later completion of the contract will also need to be notified to HMRC for SDLT purposes, but will only be a non-resident transaction if the substantial performance of the contract was a non-resident transaction.

More information on substantial performance of a contract can be found in the Stamp Duty Land Tax manual.

SDLT residence tests

Buyers need to apply these SDLT residence tests to establish if they're a non-UK resident in relation to the transaction.

Buying with someone else

The rules apply to each person, natural and non-natural, who is buying the property. If any of you individually are non-UK resident in relation to the transaction, then all buyers are treated as non-UK resident in relation to the transaction.

Individuals

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.

Although the surcharge only applies to non-resident transactions in England and Northern Ireland, days spent in the whole of the UK count for the purposes of the residence test, not just days spent in England or Northern Ireland. An individual is present in the UK on a particular day if they are situated in the UK at the end of that day.

Companies

Corporate buyers are non-UK resident if they are not UK resident for Corporation Tax purposes at the effective date of the transaction.

Special rules apply to UK resident companies which are under the direct or indirect control of non-UK resident persons. Such companies are treated as non-resident in relation to the transaction if the company:

• is a close company
• meets the non-UK control test in relation to the transaction
• is not an excluded company

More information on these special rules, including examples, can be found in SDLTM09910.

Partnerships

Partners in a business partnership buying a residential property together are treated as joint buyers.