The stamp duty land tax (SDLT) surcharge for overseas buyers of residential property was introduced on the 6th April 2021. The tax operates by adding an extra 2% to all residential rates of SDLT (including the current 3% surcharge and the flat 15% rate for certain corporate purchases) where a non-UK purchaser acquires residential property.

The surcharge applies to non-resident individuals, partnerships and companies buying UK residential property, as well as certain trusts.

Typically, the burden of the tax will fall on overseas individuals purchasing residential property, but overseas corporates will also be subject to the charge. However, some transactions are excluded.

Excluded transactions

The surcharge will not apply to certain transactions, including:

  • Residential property that is subject to commercial property rates (where six or more units are purchased in a single transaction);
  • Certain property that is classified as non-residential, such as particular care home and purpose-built student accommodation.
  • Acquisitions of leases with less than 21 years to run.

Individual Residence

An individual is a resident if they have been in the UK for at least 183 days in a 365-day period within which the date of purchase somewhere falls. If the purchase is made jointly with a spouse or civil partner, only one of the purchasers needs to be the UK resident for the charge not to apply.

However, in the case of all other joint purchasers, each purchaser must be a UK resident for the surcharge not to apply.

If the residence test has not been met at the point of sale, the surcharge must be paid; but where the test is met subsequently, the individual will have two years from the date of purchase to amend their SDLT return to reclaim the surcharge.

Company Residence

A company is treated as a resident if it is a resident for corporation tax purposes on the date of purchase but there is an exception for such companies that are controlled by any number of non-resident participators.

For the purposes of determining control, the rights of associates are added together. Broadly speaking, associates include ancestors, lineal descendants, and siblings. 

Therefore, there is a nasty trap where a family company, say owned equally by the parents and their two adult offspring, would be regarded as not resident, if any one of the children was non-resident at the time of purchase.

Unlike the rule for individual purchasers, this test looks only at the position on the date of purchase, and not at the residence of the individual shareholder thereafter.

If you need any guidance regarding the SDLT – Non-resident Surcharge, please get in touch with us via the contact form below, or speak with one of our experts:

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