Amid fears that property purchases by people based overseas are pushing up house prices for UK residents, the Government has launched a consultation on applying a one per cent Stamp Duty Land Tax (SDLT) surcharge to land and property purchases by non-UK residents.
The measure was first announced by the Chancellor at the Budget in 2018 and follows other measures aimed at non-resident buyers in recent years, including non-resident Capital Gains Tax for residential properties, which was introduced in 2015.
The surcharge will apply in addition to any existing rate of SDLT to which the buyer is subject, including the additional dwelling surcharge and the 15 per cent charge for high-value property that is subject to the Annual Tax on Enveloped Dwellings (ATED). It will apply to companies, trusts and partnerships as well as individuals and will only apply to residential properties.
Rather than using the Statutory Residence test, the Government has opted to create a separate test to determine who will be subject to the surcharge. A person will be deemed non-resident if they have spent less than 183 days in the UK in the previous 12 months. If they spend 183 days or more in the UK in the subsequent 12 months, they will be entitled to a refund.
Companies will be subject to the surcharge if they are incorporated outside the UK and their central management and control functions are outside the UK, while trusts will be subject to the trust residency rules that exist now. The consultation on the proposals will last until 6 May 2019.