HMRC SDLT: SDLTM09855 – SDLT – increased rates for non-resident transactions: Commencement and Transitional Rules – para 6 Sch 16 Finance (No.2) Bill 2021

SDLT Increased Rates for Non-Resident Transactions

This section of the HMRC internal manual explains the commencement and transitional rules for increased Stamp Duty Land Tax (SDLT) rates on non-resident transactions, as outlined in paragraph 6 of Schedule 16 of the Finance (No.2) Bill 2021.

• Details the specific conditions under which increased rates apply.
• Explains transitional provisions for transactions straddling the commencement date.
• Clarifies the impact on non-resident individuals and companies.
• Provides guidance on compliance and reporting requirements.

SDLT Increased Rates for Non-Resident Transactions: Key Details

Introduction to Non-Resident SDLT Surcharge

The non-resident Stamp Duty Land Tax (NRSDLT) surcharge is an additional charge that applies to individuals or entities buying residential properties in the UK who are not considered UK residents. This surcharge came into effect for purchases made on or after 1 April 2021.

When the NRSDLT Surcharge Applies

– The NRSDLT surcharge applies to all purchases of residential properties with an effective date of 1 April 2021 or later.

Transitional Rules Explained

Certain transitional rules allow for exemptions from the surcharge. These rules state that the NRSDLT does not apply in situations where a contract has been:

– Entered into and significantly performed before 1 April 2021.
– Entered into before 11 March 2020, unless it falls under the category of excluded transactions.

Conditions That Nullify Transitional Rules

The transitional rules do not apply if any of the following have happened after 11 March 2020:

– The contract has been changed or varied.
– There has been an assignment of rights under the contract.
– The transaction results from exercising an option, right of pre-emption, or any similar right.
– There has been an assignment, sub-sale, or another transaction where someone other than the original purchaser is entitled to request a conveyance.

Examples of Contract Variations

Changes to a contract can count as variations and may affect the NRSDLT surcharge. Some common examples of what constitutes a variation include:

– Changing the property being purchased (for instance, if the buyer initially wanted to buy a flat but then opted for a house).
– Altering the parties involved in the contract (for example, instead of two buyers, now one buyer and one seller).
– Modifying the financial terms of the contract (like changing the purchase price).
– Adjusting the lease term length (if the property is rented out).

It is important to note, however, that minor changes might not qualify as variations. For instance:

– Changing the paint colour scheme of the property might be seen as too trivial to be called a variation.
– Rescheduling the date for finalising the contract might also be considered insignificant.

Filling Out the Land Transaction Return

If the transitional rules apply to the transaction, buyers must correctly complete their land transaction return.

– In ‘Question 6 – date of contract or conclusion of missives,’ it is important to write the date when the contracts were exchanged. For the transitional rules to be valid, this date must be earlier than 11 March 2020.

– For ‘Question 52 – second part, are any of the purchasers non-UK resident?’ the answer should be ‘no’ if the transition rules are applicable.

Important Points to Note

– All buyers must understand whether they are considered non-residents under the law, as this affects the SDLT they may need to pay.
– Buyers should be aware of any changes in their contracts after 11 March 2020, as this could affect their eligibility for the transitional rules.

Links for Further Information

For more information regarding the increased rates for non-resident transactions, please visit the following link: SDLTM09855 – SDLT – increased rates for non-resident transactions: Commencement and Transitional Rules – para 6 Sch 16 Finance (No.2) Bill 2021.

Conclusion

Understanding the non-resident SDLT surcharge and the transitional rules is important for any non-resident buyer looking to purchase property in the UK. By adhering to these rules and filling in the necessary forms correctly, buyers can navigate through the regulations easily.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09855 – SDLT – increased rates for non-resident transactions: Commencement and Transitional Rules – para 6 Sch 16 Finance (No.2) Bill 2021

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