HMRC SDLT: SDLTM09890 – SDLT – increased rates for non-resident transactions: Non-resident in relation to a chargeable transaction: Individuals, special cases – para 5 Sch 9A FA03

SDLT Increased Rates for Non-Resident Transactions

This section of the HMRC internal manual explains the application of increased Stamp Duty Land Tax (SDLT) rates for non-resident transactions, focusing on individuals and special cases under paragraph 5 of Schedule 9A of the Finance Act 2003.

  • Defines non-resident status in relation to chargeable transactions.
  • Outlines specific scenarios and exceptions for individuals.
  • Provides guidance on interpreting legislative provisions.
  • Clarifies the implications for tax calculations and compliance.

Increased Rates for Non-Resident Transactions

Understanding Residence Rules for SDLT

When buying property in the UK, whether you’re a resident or not can affect how much Stamp Duty Land Tax (SDLT) you need to pay. Certain policies target non-residents with higher rates, so it’s essential to know the rules around residency status.

For the special rules surrounding non-resident transactions, we look at the guidance under paragraph 5 of Schedule 9A of the Finance Act 2003 (FA03). Here’s what you need to know:

Who is Considered a UK Resident?

An individual is seen as a UK resident for the purpose of a Stamp Duty transaction if:

– They are in the UK for a minimum of 183 days over the year leading up to, and including, the date of the property transaction. This period starts 364 days before the transaction date.
– At least one of the following conditions (A, B, or C) is met in connection with the purchase transaction.

It’s important to note that the assessment of UK residency has to be completed by the effective date of the transaction. So, if someone initially qualifies as a resident but does not meet the requirements, they cannot get a refund of the surcharge if they need to pay it.

What Counts as Being Present in the UK?

– To be considered present in the UK, a person must be physically in the country at the end of the day.
– Days spent anywhere in the UK count towards the residency assessment.
– There is a special rule for individuals who are spouses or civil partners of UK residents, which you can find in paragraph 12 of the same schedule.

Conditions for Non-Resident Transactions

There are three specific conditions that can dictate non-residency. Below is a clear outline of each:

Condition A

– This condition applies when the purchaser is, or at least one of the purchasers is, a company or a trustee of a unit trust.
– For example, this situation would arise if a non-UK individual who controls a company is involved in a purchase where the control test is used to determine UK residency.

Condition B

– Here, the purchaser is treated as entering into the transaction through circumstances laid out in paragraph 2 of Schedule 15 of FA03.
– This means if the land transaction is done as part of a partnership arrangement, it’s considered as being entered by the partners and not simply the partnership itself.

Condition C

– This condition applies if the purchaser is a trustee acting on behalf of a trust.
– The critical point here is that no beneficiaries of the trust can have rights to occupy the property for life or have claim to income generated by the property.

Exceptions to the Rules

There are different rules in situations involving bare trusts where a new lease is being acquired, or if a beneficiary has rights to occupy or earn income from the property. More about this topic can be found in the supplementary guidance like SDLTM09940.

Examples of Application

To clarify how these different conditions can affect residency status and the resulting SDLT, consider the following two examples:

Example 1: Camille and Joshua’s Purchase

Camille and Joshua co-own a limited liability partnership (LLP) called Rousseau’s. They purchase a residential property for £600,000 on June 1, 2025. Here’s the breakdown:

– From June 2, 2024, to June 1, 2025, Camille spent 200 days in the UK. Therefore, she is classified as a UK resident for this property transaction.
– During the same period, Joshua spent 150 days in the UK. However, between June 2, 2025, and June 1, 2026, he spent 200 days in the UK.

According to the basic residency rule, Joshua would be a UK resident for the second period. However, because Condition B applies due to their status being linked to the partnership, Joshua is classified as a non-UK resident under the specific rules that govern this situation.

Since Joshua is determined to be a non-UK resident, and all other required conditions are satisfied, the transaction is categorized as a ‘non-resident transaction.” Further details about the implications and definitions can be found in guidance like SDLTM09860.

Example 2: Freya and the Mikaelson Family Trust

Freya acts as the trustee for the Mikaelson family trust, and on August 1, 2023, she spends £400,000 of trust funds to buy a property for Kol, a beneficiary of the trust, who will attend university in Belfast.

– Between August 2, 2022, and August 1, 2023, Freya was in the UK for 277 days. This means she is considered a UK resident at the time of the property transaction.
– Since the condition that applies here is Condition C, the transaction is not subject to the non-resident surcharge.

In this scenario, because Freya’s residency status meets the necessary criteria and she is acting under the trust without beneficiaries having occupancy rights, the SDLT surcharge rules do not apply.

Closing Thoughts

These rules can sometimes seem complex, but they are vital for determining how non-resident status affects SDLT. Make sure to review the specific details outlined in the relevant paragraphs and schedules associated with the Finance Act 2003 for any property transaction. Understanding these distinctions will help avoid surprises regarding tax liabilities when dealing with property purchases in the UK.

For a detailed exploration of the rules or for specific queries, consider reviewing additional resources such as SDLTM33100 for partnership guidance or SDLTM09940 for trust-related transactions.

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Written by Land Tax Expert Nick Garner.
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