HMRC SDLT: SDLTM09850A – SDLT – increased rates for non-resident transactions: Introduction – section 75ZA and Sch 9A FA2003

SDLT Increased Rates for Non-Resident Transactions

This section of the HMRC internal manual introduces the principles and concepts related to the increased Stamp Duty Land Tax (SDLT) rates for non-resident transactions, as outlined in section 75ZA and Schedule 9A of the Finance Act 2003.

• Explains the applicability of increased SDLT rates for non-residents.
• Details legal references including section 75ZA and Schedule 9A FA2003.
• Provides guidance for HMRC staff on handling non-resident transactions.
• Clarifies the criteria for determining non-resident status.

Overview of Increased Stamp Duty Land Tax for Non-Residents

Introduction to the Surcharge

In the Budget 2020, the UK Government introduced a 2% surcharge on Stamp Duty Land Tax (SDLT) for individuals and companies that are classified as non-UK residents. This means that if you are a non-resident purchasing a home in England and Northern Ireland, you will need to pay an additional 2% on top of the normal SDLT rates. This rule also applies to certain UK resident companies that are controlled by non-residents.

Effective Date

The 2% surcharge applies to property purchases with an effective date of 1 April 2021 or later. This means that any residential property transaction that takes place on or after this date will be subject to the increased rates if the purchaser is a non-resident.

How the Surcharge Works

– The surcharge adds 2% to the normal SDLT rates.
– It applies to all residential property purchases, including:
– Freehold properties (which you own outright)
– Leasehold properties (which give you the right to use the property for a fixed term)

Residential Rates of SDLT

The 2% surcharge is an addition to all the standard residential SDLT rates that buyers usually pay. Here are some circumstances where SDLT rates can vary:

– First Time Buyers: First-time buyers may benefit from tax relief or lower rates.
– Additional Dwellings: If someone is purchasing an additional property, they may also face higher rates.
– Company Purchases: Companies buying homes often pay different rates that may include higher amounts.
– Higher Rate Threshold: If the purchase price exceeds certain thresholds, higher rates may automatically apply.

Impact on Rents and Leases

This surcharge also increases the SDLT owed on rents in new leases, which is important for those looking to rent properties in the UK.

Exemptions from the Surcharge

There are specific situations where the 2% surcharge will not apply:

– Non-Residential Properties: If you are buying a non-residential property, you are not subject to this surcharge.
– Mixed Transactions: The surcharge does not apply to mixed transactions, unless a claim for Multiple Dwellings Relief is made.

Reliefs and Refunds

Various reliefs may help reduce the tax burden, depending on fulfilling specific criteria. Here are some examples:

– Multiple Dwellings Relief: Buyers who acquire multiple dwellings may be eligible to claim this relief, thus avoiding the surcharge.
– Refunds: If certain conditions are satisfied post-transaction, it might be possible to claim a refund of the surcharge.

Legislation Changes

The changes regarding the surcharge are part of the Finance Bill 2021. This bill will amend the existing laws in the Finance Act 2003 by including new provisions in section 75ZA and Schedule 9A.

Final Thoughts

If you are planning to buy property in England and Northern Ireland and are classified as a non-UK resident or a UK resident company controlled by non-residents, it’s essential to be aware of these new regulations. Ensure that you calculate your SDLT liability accurately, accounting for this surcharge, and explore any available reliefs that may apply to your situation.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09850A – SDLT – increased rates for non-resident transactions: Introduction – section 75ZA and Sch 9A FA2003

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