HMRC has issued draft legislation for 2% additional stamp duty land tax (SDLT) for non-UK resident purchasers of residential property, set to be introduced from 1 April 2021 and forecast to raise £250m over five years
The surcharge on residential property purchase was originally announced in Budget 2018, although the final percentage rate was only revealed in Rishi Sunak’s Budget earlier this year. Original plans had been for an additional 1% added to the SDLT, while the Conservative manifesto suggested a 3% rate.
The new 2% surcharge will be in addition to the extra 3% that will be added to purchases of second homes, creating a potential 17% marginal rate for the highest charge. The new rate will apply to property purchases in England and Northern Ireland.
The government argues this will help to control house price inflation and to support UK residents to get on to and move up the housing ladder. It suggests that the move will raise £250m over the next five years, which will be used by the government to tackle rough sleeping.
Transitional rules may apply where contracts are exchanged prior to 11 March 2020 but complete or are substantially performed on or after 1 April 2021, and likewise, they may apply where a contract is substantially performed on or before 31 March 2021 but does not complete until 1 April 2021 or later.
The requirements for the additional 2% charge to apply will be set out in new Schedule 9A of Finance Act 2003. The new rates will be two percentage points higher than those that apply to purchases made by UK residents, and will apply to purchases of both freehold and leasehold property as well as increasing SDLT payable on rents on the grant of a new lease.
The government said the measure will affect individuals who will be required to consider their residence status when purchasing a residential property. Most individuals will be clear as to their residence status for the purposes of SDLT but some individuals with more complex affairs or who have regular periods in and out of the UK may require additional advice and incur additional costs in determining their tax liability.
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.
By Philip Smith