HMRC SDLT: SDLTM09870A – SDLT – Increased rates for non-resident transactions: Application of the temporary reduced rates of SDLT to non-resident transactions

SDLT Increased Rates for Non-Resident Transactions

This section of the HMRC internal manual discusses the application of temporary reduced rates of Stamp Duty Land Tax (SDLT) for non-resident transactions. It outlines the principles and concepts related to these tax adjustments.

• Explanation of increased SDLT rates for non-residents.
• Details on temporary reduced rates applicable to non-resident transactions.
• Guidance on the application process for these rates.
• Clarification of eligibility criteria for non-resident individuals.

Stamp Duty Land Tax (SDLT) – Increased Rates for Non-Residents Transactions: Temporary Reduced Rates Application

The Stamp Duty Land Tax (SDLT) system in the UK has special rules for non-resident property buyers. This article explains how temporary reduced rates of SDLT apply to residential property purchases during specific time periods and the additional charges for non-residents.

Overview of Temporary Reduced Rates

• The temporary reduced rates for SDLT apply to residential property purchases with an effective date from 8 July 2020 to 30 June 2021.
• These rates also apply from 1 July 2021 to 30 September 2021.

After these periods, the standard SDLT rates will be reinstated, which were in place before 8 July 2020.

Additional Charges for Non-Residents

From 1 April 2021 to 30 September 2021, if a property transaction is classified as a non-resident transaction, an additional 2% surcharge will be added to the temporarily reduced rates. This means that non-residents will pay a higher rate than residents when buying property during this time.

Key Concepts and Principles

It is important to understand a few key definitions and rules when dealing with SDLT for non-residents:

• Non-Resident: A non-resident is defined under the guidelines found in Schedule 9A to FA03. This definition primarily takes into account the time spent living in the UK. If you do not meet the UK residency criteria, you are considered a non-resident for SDLT purposes.
• Effective Date: This is the date when the transaction occurs and is important for determining which SDLT rates apply.
• Chargeable Transactions: These are property transactions that incur SDLT. Most residential property sales fall into this category.

Example Illustrations

Here are two examples that show how the SDLT is calculated under the temporary reduced rates and the non-resident surcharge.

Example 1: Genevieve’s Purchase

• Buyer: Genevieve
• Purchase Date: 1 May 2021
• Property Type: Freehold residential property in England
• Purchase Price: £450,000
• Additional Properties: Genevieve owns no other properties

Since Genevieve does not own another property, the additional higher rates for extra dwellings do not apply. However, Genevieve is classified as a non-UK resident. Therefore, the 2% non-resident surcharge is added.

The calculations for her SDLT liability are as follows:

• 2% on £450,000 = £9,000
  (0% temporary reduced rate + 2% non-resident surcharge)

Genevieve’s total SDLT liability amounts to £9,000.

Example 2: Cortez’s Purchase

• Buyer: Cortez
• Purchase Date: 31 August 2021
• Property Type: A new 99-year lease on a flat in Northern Ireland
• Premium: £250,000
• Annual Rent: £1,200
• Additional Properties: Cortez already owns another property

Cortez is purchasing a property while owning another. Hence, the higher rates for additional dwellings apply in his case. As Cortez is also a non-UK resident, he will face the additional 2% surcharge.

The SDLT liability calculations for Cortez are separated into two portions: the premium and the rent.

Premium Calculation

• 5% of £250,000 = £12,500
  (3% higher rates for additional dwellings + 2% non-resident surcharge)

Rent Calculation

• 2% of £33,147 = £662
  (0% temporary reduced rate + 2% non-resident surcharge)

Putting it all together, Cortez’s total SDLT liability is:

• £12,500 (premium) + £662 (rent) = £13,162

Time-sensitive Nature of SDLT Regulations

It is vital to act promptly when considering purchasing property. The dates highlighted indicate periods when the reduced rates are applicable. Paying attention to these time frames can lead to significant savings on SDLT.

• Make sure to check the effective date of your transaction to ensure you benefit from the reduced rates if eligible.
• If your transaction qualifies as a non-resident sale, make arrangements to compute the additional surcharge correctly.

Consultation and Resources

For more detailed information regarding SDLT, including specific rules and current rates, it is recommended to consult the official HMRC resources or speak to a tax professional. Various online platforms provide calculators and guides to assist potential buyers in understanding their liabilities before proceeding with any property purchases.

Detailed guidelines can be found in the official documentation available through HMRC websites and platforms.

For additional guidance on non-resident transactions and the application of temporary reduced rates, you can visit SDLTM0000.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM09870A – SDLT – Increased rates for non-resident transactions: Application of the temporary reduced rates of SDLT to non-resident transactions

View all HMRC SDLT Guidance Pages Here