Non-resident stamp duty and alternative property finance
In brief
For certain alternative property finance arrangements, a financial institution’s non-resident SDLT position follows the person receiving the finance.
- The rule applies to the institution’s first purchase.
- A company institution uses the company residence test.
- The documents and UK day record are central evidence.
Scroll down for the full analysis.
Read the original guidance here:
Non-resident stamp duty and alternative property finance
When a bank or other financial institution buys your home under certain alternative finance arrangements, its own location is not the key point. For the non-resident stamp duty surcharge, the law looks instead at whether you are resident. That can change the SDLT bill on the institution’s first purchase.
What this rule is about
Alternative property finance can involve two linked steps. A financial institution first buys the property. It then either leases it to you with a route to ownership, or sells it to you while taking security over it.
That structure can make the institution the party that must pay SDLT on the first purchase. Yet paragraph 16 of Schedule 9A changes whose residence is used for the non-resident surcharge.
Put simply: the institution does not use its own residence position for this narrow purpose. It uses yours.
What the official source says
HMRC’s manual says this rule applies where a financial institution makes the first property purchase in an alternative finance arrangement covered by section 71A or section 73 of the Finance Act 2003.
For that first purchase, the institution counts as non-resident if, and only if, the person taking the finance is non-resident for that purchase. The relevant residence test is the one that would apply to the institution.
- Section 71A covers a structure where the institution buys the property, grants a lease, and gives the customer a right to require a transfer.
- Section 73 covers a structure where the institution buys the property and then sells it to the customer, who gives security to the institution.
- The special residence rule concerns the institution’s first purchase.
- For company institutions, use Schedule 9A.
- The later lease or sale may be exempt from SDLT if the statutory conditions are met.
The law, rather than HMRC’s manual, decides whether the arrangement qualifies. The manual is useful because it explains how HMRC applies the residence rule.
What this means in practice
Although a company’s overseas status might appear to decide whether the non-resident surcharge applies, that status does not control the result when the arrangement uses this special rule. The customer’s UK days may decide it instead.
This matters because the first purchase is usually the step on which the financial institution pays SDLT. The later step may be exempt, but that does not remove the need to work out the tax on the first one correctly.
- Ask who bought the property from the original seller.
- Identify whether that buyer is a financial institution.
- Check whether the documents create a section 71A or section 73 arrangement.
- Work out the customer’s residence for the first purchase date.
- Use the institution’s test, not an individual’s.
- Keep records showing the customer’s UK presence during the relevant period.
If your conveyancer says the non-resident surcharge applies because the finance company is overseas, check whether the documents establish the relevant arrangement and whether the customer’s residence has been tested. The company’s own position may not settle the question.
How to analyse it
Start with the paperwork, not the label used for the finance. The answer turns on the legal steps and on who is taking the finance.
- List each property step in date order.
- Identify the institution’s first purchase from the seller.
- Check whether the arrangement is within section 71A or section 73.
- Confirm that the institution is the party responsible for SDLT on that first purchase.
- Identify the person receiving the finance.
- Apply the residence test used for the institution’s type of buyer.
- For a company institution, use the company test in paragraph 5(1).
- Then decide whether the institution is treated as non-resident for the first purchase.
- Check separately whether the later lease or sale meets the conditions for exemption.
Do not mix up the two steps. The special residence rule answers the surcharge question for the first purchase. It does not by itself prove that the later step is exempt.
Example
Aya enters into a resale-based alternative finance arrangement with Strix Corporation. Strix buys a freehold home in Northern Ireland for £400,000 on 1 September 2022. It then sells the home to Aya for £500,000, to be paid over 25 years. Aya gives Strix security over the home.
HMRC’s example says Strix pays SDLT on the first purchase. The later sale to Aya is exempt if the section 73 conditions are met. Although Strix is the company making the first purchase, Aya’s residence decides whether Strix is treated as non-resident for the surcharge.
Aya spent 180 days in the UK in the period used in HMRC’s example. HMRC therefore treats Aya as non-resident. Strix is also treated as non-resident for that first purchase.
Change the facts and the answer can change. In HMRC’s second example, Rosalee spent 305 days in the UK in the relevant period. HMRC treats her as resident, so the company is not subject to the surcharge on that basis.
Why this can be difficult in practice
The rule’s idea is not difficult. Instead, the challenge is identifying the right arrangement, applying the right residence test to the right person, and ensuring that the relevant dates have been used. Even a small date error can change the result.
- Labels cannot prove section 71A or 73.
- The price paid by the institution and the total amount paid by the customer may differ.
- A lease arrangement and a resale arrangement follow different statutory sections.
- The person who receives the finance may not be the person people first think is relevant.
- Travel records need to cover the period required by the applicable residence test.
- HMRC’s examples are illustrations, not a complete substitute for the legislation.
Most people focus on where the lender is based. Here, the key question is different: who is taking the finance, and what is that person’s residence position under the company test?
Key takeaways
- The financial institution’s residence can follow the customer’s residence for the first property purchase.
- This special rule applies only to specified alternative property finance arrangements.
- Check the documents and the customer’s UK day record before deciding whether the surcharge applies.
Technical analysis
For advisers, and for anyone who wants to check the law behind this page. You do not need this section to understand the guidance above.
Legislation
- FA 2003 section 75ZA — the extra rates for non-resident property transactions
- FA 2003 section 71A — lease-based alternative property finance arrangements; tax exemption for the later lease transaction
- FA 2003 section 73 — resale-based alternative property finance arrangements; tax exemption for the later resale transaction
- FA 2003 Schedule 9A para 5 — company residence test for the non-resident surcharge
- FA 2003 Schedule 9A para 16 — when lease-based finance arrangements are covered; whose residence decides the lease-based finance result; when resale-based finance arrangements are covered; whose residence decides the resale-based finance result
Official guidance
The pages below are HMRC’s guidance. Guidance is not law. It sets out how HMRC reads the legislation, and it is not binding on you, on a tribunal or on a court. Where guidance and the legislation differ, the legislation wins. HMRC can also change or withdraw guidance, and it may not cover your facts.
Where this is not settled
- The correct result depends on the full finance documents and whether the arrangements meet every condition in section 71A or section 73.
- The supplied statutory material for Schedule 9A is current only to 17 November 2025. Current-law status should be checked for a later transaction.
Evidence you would need
This kind of case is decided on the facts of the individual property. These are the records that usually settle it, and the ones an adviser would ask you for.
- The finance agreement, lease or resale documents, and any option agreement
- The date of the financial institution’s first property purchase
- The identity and status of the financial institution
- A day-by-day record of the financed person’s time in the UK for the relevant period
- Evidence that the SDLT requirements for the first purchase were met
Explore this with an AI
Readers often want to test their own situation. Copy the prompt below into ChatGPT, Claude or Gemini. It hands the model the actual legislation for this page rather than letting it answer from memory, and tells it to be explicit about what is uncertain. What comes back is information, not advice – check it against the links above.
I am researching UK Stamp Duty Land Tax (SDLT), which applies in England and Northern Ireland. MY QUESTION Non-resident stamp duty and alternative property finance [Replace this with your own situation: what you are buying, the price, the dates, who the buyer is, and what you plan to do with the property.] THE LAW THIS TURNS ON - FA 2003 section 75ZA - the extra rates for non-resident property transactions https://www.legislation.gov.uk/ukpga/2003/14/section/75ZA/2025-11-17 - FA 2003 section 71A - lease-based alternative property finance arrangements https://www.legislation.gov.uk/ukpga/2003/14/section/71A/2025-11-17 - FA 2003 section 71A - tax exemption for the later lease transaction https://www.legislation.gov.uk/ukpga/2003/14/section/71A/2025-11-17 - FA 2003 section 73 - resale-based alternative property finance arrangements https://www.legislation.gov.uk/ukpga/2003/14/section/73/2025-11-17 - FA 2003 section 73 - tax exemption for the later resale transaction https://www.legislation.gov.uk/ukpga/2003/14/section/73/2025-11-17 - FA 2003 Schedule 9A para 5 - company residence test for the non-resident surcharge https://www.legislation.gov.uk/ukpga/2003/14/schedule/9A/paragraph/5/2025-11-17 - FA 2003 Schedule 9A para 16 - when lease-based finance arrangements are covered https://www.legislation.gov.uk/ukpga/2003/14/schedule/9A/paragraph/16/2025-11-17 - FA 2003 Schedule 9A para 16 - whose residence decides the lease-based finance result https://www.legislation.gov.uk/ukpga/2003/14/schedule/9A/paragraph/16/2025-11-17 - FA 2003 Schedule 9A para 16 - when resale-based finance arrangements are covered https://www.legislation.gov.uk/ukpga/2003/14/schedule/9A/paragraph/16/2025-11-17 - FA 2003 Schedule 9A para 16 - whose residence decides the resale-based finance result https://www.legislation.gov.uk/ukpga/2003/14/schedule/9A/paragraph/16/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09950 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. Guidance from HMRC is its view of the law, not the law, and does not bind a tribunal or a court. 2. Tell me what the rule actually requires, in plain English. 3. Tell me which facts decide the answer, and which facts would change it. 4. Tell me what evidence I would need to support the position. 5. Be explicit about anything unsettled or fact-sensitive. Do not guess. 6. Your training data has a cutoff and SDLT rates and reliefs change at fiscal events. Say so if you are not sure the law is current. POINTS ALREADY KNOWN TO BE UNCERTAIN ON THIS TOPIC - The correct result depends on the full finance documents and whether the arrangements meet every condition in section 71A or section 73. - The supplied statutory material for Schedule 9A is current only to 17 November 2025. Current-law status should be checked for a later transaction. Do not give me a conclusion you cannot support from the provisions above.
Legislation links show Finance Act 2003 as it stood on 2025-11-17. The law may have changed since, and the rules that apply are those in force on the date of your transaction. The official guidance this page is based on is here.
This page was last updated on 31 August 2026
Useful article? You may find it helpful to read the original guidance here: Non-resident stamp duty and alternative property finance
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