HMRC SDLT: SDLT Increased Rates for Non-Resident Joint Purchasers: Rules and Exceptions Explained
SDLT Increased Rates for Non-Resident Transactions: Joint Purchasers
This section explains the rules for Stamp Duty Land Tax (SDLT) concerning joint purchasers, particularly when increased rates apply to non-resident transactions. The surcharge is applicable if any joint purchaser is considered non-resident, regardless of the size of their interest. Special rules exist for spouses and civil partners of UK residents, and relief is available for Crown employees and their spouses or civil partners.
- General SDLT rules for joint purchasers are in section 103 FA03.
- The surcharge applies if any purchaser is non-resident.
- Applies to both joint tenants and tenants in common.
- Special rules for spouses and civil partners of UK residents.
- Relief available for Crown employees and their spouses or civil partners.
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Read the original guidance here:
HMRC SDLT: SDLT Increased Rates for Non-Resident Joint Purchasers: Rules and Exceptions Explained
Understanding SDLT for Joint Purchasers Who Are Non-Residents
Overview of SDLT and Joint Purchasers
Stamp Duty Land Tax (SDLT) applies when you buy property or land in the UK. If two or more people, known as joint purchasers, buy property together, there are specific rules they need to follow. The general rules for joint purchasers can be found in section 103 of the Finance Act 2003 (FA03).
For joint purchasers, SDLT surcharges come into play based on the residency status of each purchaser. If any of the purchasers involved in a transaction are considered non-residents, the surcharge will apply, regardless of how small their share in the property is.
When Does the Surcharge Apply?
The surcharge applies under the following conditions:
– The transaction is a chargeable one, meaning that SDLT is due.
– At least one of the joint purchasers meets the non-resident criteria when considered individually.
> Example: If three friends buy a house together, and one of them has lived outside the UK for the last 12 months, the SDLT surcharge will apply. It does not matter how much equity each friend holds in the property.
Types of Co-Ownership
Joint purchasers can own property in different ways. The two main forms of ownership are:
– Joint Tenants: All owners have equal rights to the property, and if one owner passes away, their share automatically goes to the remaining owners.
– Tenants in Common: Each owner can hold different shares in the property and can pass their share to someone else in their will.
In both ownership types, the residency status of each purchaser will determine whether the surcharge applies, as long as at least one purchaser is considered non-resident.
Understanding the Residence Test
The residence test is essential in deciding if the purchasers qualify for a non-resident transaction. This test looks at how long an individual has lived in the UK.
> To Qualify as a UK Resident:
> – Generally, the person must have been in the UK for at least 183 days in the 12 months before the purchase.
For further details on how the residence test is applied to joint purchasers, you can refer to SDLTM09880.
Special Cases: Spouses and Civil Partners
There are special considerations for spouses and civil partners of UK residents. If one partner is a UK resident and the other is not, different rules can apply.
For more information on these specific rules, visit SDLTM09885.
Relief for Crown Employees and Their Partners
Certain individuals, such as Crown employees and their spouses or civil partners, might be entitled to relief from the SDLT surcharge. This relief acknowledges their work and contributions to the UK.
More details about this relief can be found at SDLTM09895.
Key Points to Remember
– The SDLT surcharge for joint purchasers applies if any buyer is a non-resident.
– Ownership types, whether joint tenants or tenants in common, don’t change the surcharge requirement.
– The residence test determines if a purchaser is considered a UK resident.
– Special rules apply for spouses/civil partners and Crown employees.
What is a Non-Resident Transaction?
A non-resident transaction is characterized by at least one purchaser being classified as a non-resident according to the residence test. This classification can lead to a higher SDLT rate than would normally apply if all purchasers were considered residents.
Calculating the SDLT for Joint Purchasers
When calculating SDLT for joint purchasers, it’s important to consider:
1. The total purchase price of the property: This will influence the amount of SDLT due.
2. The number of purchasers: Each purchaser’s share can impact the overall surcharge.
3. Residency status: As mentioned, if any purchaser is a non-resident, the surcharge will apply.
Example of SDLT Calculation with Joint Purchasers
Let’s take an example for clarity on how the SDLT might work for joint purchasers:
– Imagine three friends decide to buy a flat for £600,000.
– One friend has been living abroad for the last two years and is classified as a non-resident.
In this case, they have a total purchase price of £600,000. Because one friend is a non-resident, their transaction will be subject to the increased SDLT rates applicable to non-residents. Depending on the specific rates at the time of the purchase, this surcharge could significantly increase the SDLT amount due.
Understanding Stamp Duty Rates for Non-Residents
SDLT rates can vary depending on purchase prices and whether any of the purchasers are non-residents. Here are the current rates (as of the writing of this guidance):
– Up to £125,000: 0%
– £125,001 to £250,000: 2%
– £250,001 to £925,000: 5%
– £925,001 to £1.5 million: 10%
– Over £1.5 million: 12%
Additionally, non-resident purchasers may be subject to higher rates in certain scenarios.
Implications for Non-Residents Buying Property
Non-residents looking to purchase property in the UK should be aware of the following:
– The total amount of SDLT owed could be higher due to the surcharge.
– Understanding how to structure their purchase—be it individually or as joint purchasers—can vastly impact the total tax liability.
– It is essential to cultivate a clear understanding of their residency status concerning the transaction.
Final Considerations for Joint Purchasers
Joint purchasers must navigate various tax implications when buying property, especially regarding non-resident status. Understanding the rules surrounding the SDLT, how to apply the residence test, and considering the ownership structure can save buyers money and avoid complications.
As rules and rates may change over time, it is always prudent to consult with a tax advisor or legal professional for the most current and relevant advice for your specific situation.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLT Increased Rates for Non-Resident Joint Purchasers: Rules and Exceptions Explained
