HMRC SDLT: SDLTM09895 – SDLT – increased rates for non-resident transactions: Non-resident in relation to a chargeable transaction:Crown employment – para 6 Sch 9A FA03

SDLT Increased Rates for Non-Resident Transactions

This section of the HMRC internal manual provides guidance on the increased Stamp Duty Land Tax (SDLT) rates applicable to non-resident transactions, specifically concerning Crown employment. It outlines the criteria for determining non-residency in relation to a chargeable transaction under paragraph 6 of Schedule 9A of the Finance Act 2003.

• Explains the conditions under which increased SDLT rates apply.
• Focuses on non-resident status in the context of Crown employment.
• Details legal references and relevant legislative frameworks.
• Provides procedural guidance for HMRC staff.

Understanding SDLT and Crown Employment Status

This article explains how Stamp Duty Land Tax (SDLT) applies to individuals in Crown employment, particularly regarding their residency status and how it affects land transactions. The guidance is based on legislative references from Schedule 9A of the Finance Act 2003.

What is Crown Employment?

Crown employment refers to jobs that are held under the Crown. This typically means employment that is part of the public sector. There are specific characteristics of Crown employment:

• It must have a public nature.
• The earnings must be paid from the public revenue of the UK or Northern Ireland.

Examples of Crown employees include:

• Civil servants
• Members of the Armed Forces
• Diplomats

Residence Tests for Crown Employees

When determining if an individual is a UK resident, different rules apply to those in Crown employment. This is outlined in paragraphs 4 and 5 of the residence tests. An individual who holds a Crown employment is regarded as present in the UK at the end of the day if:

• They are employed under the Crown and
• Are outside the UK performing duties related to that employment.

This means that even if a Crown employee is abroad, they are still considered as residing in the UK for tax purposes at the end of the day.

Residence Rules for Spouses and Civil Partners

These residency rules not only apply to Crown employees but also extend to their spouses or civil partners, given that they are living together at the end of that day. This ruling is detailed in paragraph 6(2).

Understanding Living Together

The term living together has specific criteria outlined in Section 1011 of the Income Tax Act 2007. For spouses or civil partners to be considered as living together, they must not be:

• Separated by a court order;
• Separated by a written agreement;
• In a state of separation that seems likely to be permanent.

If any of these conditions are met, the couple is considered separated, affecting their residency status for SDLT purposes.

Making a Claim for SDLT Relief

To apply for the residency relief, individuals must make a declaration in their land transaction return. This process is specified in paragraph 6(3). The relief can be claimed by answering Question 52 on the SDLT 1 form when completing the return.

Example Scenario

Let’s look at a practical example to clarify how these rules work:

Marcel serves in the British Army and is stationed in Cyprus from 1 January 2025 until 1 January 2028. He is accompanied by his wife, Rebekah, and they do not spend any time in the UK during this period.

On 31 August 2026, Rebekah decides to purchase a freehold residential property in England priced at £900,000. Despite not spending time in the UK, the residency test from paragraph 4 is used to see if Rebekah can be classified as a UK resident.

During the entire time Marcel was in Cyprus, Rebekah lived with him. Since Marcel was in Crown employment performing military duties, paragraph 6(2) applies. Consequently, Rebekah is considered a UK resident for the purpose of the property transaction.

Key Concepts Summary

The essential points to remember regarding Crown Employment and residency for SDLT purposes are:

• Crown employment means being employed by the government and having public sector earnings.
• Crown employees are generally seen as UK residents even when they are outside the UK, as long as they are fulfilling their job duties.
• Spouses and civil partners of Crown employees are also viewable as UK residents for tax purposes, provided they live together.
• It’s essential to formally claim the relief on tax forms to benefit from these regulations.

This guidance is important for understanding how employment status and familial relationships can impact tax responsibilities, especially for those with a connection to Crown employment. By recognising these rules, individuals can better navigate their SDLT obligations.

For further reference on SDLT and Crown Employment, you may find more details at SDLTM09895.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09895 – SDLT – increased rates for non-resident transactions: Non-resident in relation to a chargeable transaction:Crown employment – para 6 Sch 9A FA03

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