Understanding Non-UK Control Test for Non-Resident Company Transactions and SDLT Surcharge

SDLT non-resident surcharge: when a company is under non-UK control

A company buying UK land can be treated as non-resident for the SDLT surcharge even if the company itself is UK resident, if it is under non-UK control. This uses a special version of the close company rules, with SDLT-specific changes, so the focus is on who really controls the company and whether those controllers are non-resident for the transaction.

• Control is not just about owning most shares; it can also come from voting power, rights to income or assets, or wider control over the company’s affairs.
• The normal close company rules are modified for SDLT, so the test is not limited to control by five or fewer participators and can still catch some structures involving non-close or quoted companies.
• The key people are “relevant participators”, broadly meaning participators who are non-resident for the transaction, with special rules and exclusions including for some general partners in limited partnerships.
• Residence must be checked for each participator using the correct rules for that type of person, such as an individual, company or trustee.
• Attribution rules can apply to rights and powers, but only within the limits set by Schedule 9A, so indirect and layered ownership structures may matter.
• In practice, you must review the real control structure of the buyer company rather than rely on labels such as UK resident, group company or quoted company.

Scroll down for the full analysis.

SDLT non-resident surcharge: when a company is treated as under non-UK control

This page explains one part of the SDLT non-resident surcharge rules for companies. The issue is whether a company buying land is under “non-UK control” for the transaction. That matters because, if this test is met, the company may be treated as non-resident for surcharge purposes even if the company itself is UK resident.

What this rule is about

The source material deals with the “second condition” for companies in the non-resident surcharge rules in Schedule 9A to Finance Act 2003. The question is not simply where the company is resident. Instead, the rules also ask who controls the company.

For this purpose, the legislation borrows the close company rules from Chapter 2 of Part 10 of the Corporation Tax Act 2010, but changes them in important ways. The result is a special test for SDLT surcharge purposes, not the ordinary close company test applied without modification.

In broad terms, the company meets the non-UK control test if it falls within this modified close company framework and the relevant controllers are non-resident in relation to the chargeable transaction.

What the official source says

The source says that the non-UK control test must be read alongside the close company rules in the Corporation Tax Act 2010.

It also points to the general meaning of “control” in section 450 CTA 2010. A person can control a company in several different ways. Control is not limited to holding a majority of ordinary shares. It can arise through:

• control over the company’s affairs generally,
• voting power,
• share capital or issued share capital,
• rights to income, or
• rights to assets.

For the surcharge, the company must meet the basic definition of a close company, but subject to four modifications set out in paragraph 9 of Schedule 9A FA 2003.

First, references in section 439 CTA 2010 to a “participator” are changed to “relevant participator”, and the usual “five or fewer participators” concept is replaced. Instead, the test looks at control by any number of relevant participators.

Second, section 444 CTA 2010 is modified by omitting condition A. In practical terms, this means the surcharge rules can still treat a company as within scope even where control sits through one or more companies that are not themselves close companies. The ordinary close company limitations are widened for this purpose.

Third, section 446 CTA 2010 is left out entirely. The source explains that this means certain quoted companies that would otherwise be excluded from the close company rules can still be included for surcharge purposes.

Fourth, the attribution rule in section 451 CTA 2010 applies, but only subject to the special limits in paragraph 10 of Schedule 9A. So rights and powers can still be attributed, but not without restriction.

A “relevant participator” is a participator who is non-resident in relation to the transaction and is not a general partner in a limited partnership, subject to an exclusion mentioned on the following HMRC page.

The source also makes clear that, when deciding whether a participator is non-resident, you must use the correct residence test for that person. The answer may depend on special residence rules that apply to the particular type of person involved.

What this means in practice

This rule widens the circumstances in which a company purchaser can be caught by the non-resident surcharge.

A common misunderstanding is to look only at the residence of the company that is buying the property. That is not enough. A UK-resident company can still be within the surcharge rules if the relevant control sits with non-resident participators under this modified test.

Another important point is that control is broader than legal ownership of shares. A person may control a company through voting rights, rights to income or assets, or broader influence over the company’s affairs. So the analysis may require more than reading the share register.

The modifications also matter. Under ordinary close company rules, some structures might fall outside the test because of the “five or fewer participators” requirement, because control is held through non-close companies, or because of certain quoted company exclusions. For surcharge purposes, those limits are relaxed or removed.

So the practical question is not simply “is this a close company?” but “would this company be treated as close under the special SDLT version of the rules, looking only at relevant participators and applying the Schedule 9A modifications?”

How to analyse it

A sensible way to approach the issue is as follows.

• Identify the purchaser company in the chargeable transaction.
• Identify all participators who may be relevant to control.
• For each participator, decide whether they are non-resident in relation to that transaction using the correct residence test for that type of person.
• Exclude any participator who is not a “relevant participator” for these purposes, including a general partner in a limited partnership unless the separate exclusion on the next HMRC page changes the result.
• Apply the section 450 CTA 2010 control concept. Ask how control is exercised or capable of being exercised: through votes, shares, income rights, asset rights, or broader control over the company’s affairs.
• Apply the modified close company rules, remembering that the test is not limited to five or fewer persons and can include structures involving non-close companies.
• Consider whether any rights or powers are attributed under section 451 CTA 2010, but only to the extent allowed by paragraph 10 of Schedule 9A.

The key is to analyse the actual control structure rather than rely on labels such as “UK company”, “group company”, or “quoted company”.

Example

This is an illustration only.

A UK-incorporated company buys English land. Looking only at the buyer’s own residence, it may appear that the non-resident surcharge should not apply. But the company is controlled by participators who are non-resident in relation to the transaction. Their control arises through voting rights and rights to the company’s income. If, under the modified close company rules in Schedule 9A, those non-resident participators amount to the relevant controlling participators, the company can meet the non-UK control test even though the buyer itself is UK resident.

By contrast, if the persons with the relevant control are not non-resident in relation to the transaction, or are not “relevant participators” within the statutory definition, this particular test may not be met.

Why this can be difficult in practice

Several parts of the analysis are fact-sensitive.

First, residence must be tested person by person using the appropriate rules. The source does not set out those residence tests in detail, and different rules may apply depending on whether the participator is an individual, company, trustee or other person.

Second, control can exist in more than one form. Legal ownership and practical control do not always match. Rights to income or assets, shareholder agreements, indirect holdings and layered structures may all matter.

Third, this is not the ordinary close company test. The Schedule 9A modifications change the result. Someone familiar with corporation tax close company rules could reach the wrong answer if they apply the unmodified rules.

Fourth, attribution under section 451 CTA 2010 applies only with the limits in paragraph 10. The source page signals that attribution matters, but the detailed limits sit elsewhere. That means the answer may depend on additional provisions not reproduced on this page.

Finally, the source notes a special point about general partners in limited partnerships and refers to a further HMRC page for an exclusion. So in partnership structures, the analysis may need one more step before deciding whether a participator counts as a relevant participator.

Key takeaways

• A company can meet the SDLT non-UK control test even if the buyer company itself is UK resident.
• The test uses the close company rules in CTA 2010, but with important SDLT-specific modifications.
• Control is wider than share ownership and may depend on voting rights, income rights, asset rights, indirect holdings and attribution rules.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding Non-UK Control Test for Non-Resident Company Transactions and SDLT Surcharge

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