HMRC SDLT: SDLTM09860 – SDLT – increased rates for non-resident transactions: Non-resident Transactions – para 2 Sch 9A FA03

SDLT Increased Rates for Non-Resident Transactions

This section of the HMRC internal manual provides guidance on increased Stamp Duty Land Tax (SDLT) rates for non-resident transactions. It outlines the principles and concepts related to these transactions under paragraph 2, Schedule 9A of the Finance Act 2003.

• Details the criteria for non-resident status.
• Explains the applicable increased SDLT rates.
• Describes the legal framework governing these transactions.
• Provides examples and scenarios for better understanding.

Increased Rates for Non-Resident Transactions

The following information explains the rules about the increased Stamp Duty Land Tax (SDLT) rates that apply to non-resident transactions as per paragraph 2, Schedule 9A, Finance Act 2003.

When Does the Surcharge Apply?

The surcharge applies when someone purchases a significant interest in one or more homes. This includes both freehold and leasehold ownership. The situations where the surcharge kicks in are outlined below:

• The purchase is for a significant interest in one or more homes.
• The purchase involves any combination of homes and other types of property.
• At least one of the buyers is not a UK resident for the purposes of this transaction.
• The effective date of the transaction shows that the major interest being acquired is not a lease with less than 7 years left to run.
• The total value of the transaction exceeds a minimum threshold (known as the de minimis threshold).

Understanding Major Interests

A “major interest” in a home refers to owning either the freehold or leasehold. It can also mean owning an undivided share in such a property. For more detailed information on this, you can refer to SDLTM09865.

The De Minimis Threshold

The de minimis threshold is a minimum limit set for a transaction. It has different criteria:

• If the transaction does not involve rent, the total consideration must be £40,000 or more.
• If rent is part of the transaction consideration:
  • The portion of what is not rent must be £40,000 or more, or
  • The annual rent must be £1,000 or more.

Defining Annual Rent

‘Annual rent’ refers to the average yearly amount payable over the lease term. If different rent amounts apply during the lease, you should consider the average annual rent based on the highest ascertainable amount at the time of the transaction. This applies when:

• Differing rent amounts are specified for various parts of the lease term.
• These rent amounts can be identified at the effective date of the transaction.

Who is Considered Non-Resident?

A person is considered non-resident for a transaction if they meet any of the criteria set out in the guidance. This applies to both individuals and companies. Special rules exist for certain types of purchases and transactions, and more details can be found at SDLTM09880 and subsequent sections.

Examples of Lease Transactions

Here are some examples to clarify how the rules apply to lease transactions:

– If a leasehold interest was originally valid for 50 years but has only 4 years remaining at the time of purchase, this transaction will not incur the surcharge.

– Conversely, if the same leasehold interest has 8 years left at the time of the transaction, the surcharge will apply, assuming all other conditions are satisfied.

What Transactions Are Not Considered Non-Resident Transactions?

Some transactions are exempt from being classified as non-resident transactions. Therefore, the increased rates will not apply to these:

• Purchases of non-residential properties.
• Mixed-use properties (both residential and non-residential), unless:
  • There are multiple dwellings included in the transaction and a claim for ‘Multiple Dwellings Relief’ is made for the residential portion, or
  • The transaction involves a higher threshold interest as described in Schedule 4A.

For further guidance on how the surcharge applies to transactions where Multiple Dwellings Relief is claimed, see SDLTM29900.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09860 – SDLT – increased rates for non-resident transactions: Non-resident Transactions – para 2 Sch 9A FA03

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