HMRC SDLT: SDLTM09935 – SDLT – increased rates for non-resident transactions: Non-resident in relation to a chargeable transaction: Companies, second condition, examples

Principles and Concepts of SDLT Increased Rates for Non-Resident Transactions

This section of the HMRC internal manual provides guidance on the application of increased Stamp Duty Land Tax (SDLT) rates for non-resident transactions, specifically focusing on companies. It explains the second condition for determining non-residency in relation to chargeable transactions.

Defines non-residency criteria for companies involved in property transactions.
Illustrates the application of increased SDLT rates with examples.
Clarifies the second condition for non-resident status.
Aims to ensure compliance with SDLT regulations.

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HMRC SDLT: SDLTM09935 – SDLT – increased rates for non-resident transactions: Non-resident in relation to a chargeable transaction: Companies, second condition, examples

Guidance on Increased Rates for Non-Resident Transactions in SDLT

This article offers guidance in plain UK English regarding the Stamp Duty Land Tax (SDLT) increased rates that apply to non-resident transactions, particularly focusing on the conditions involving companies. The examples illustrate how to determine whether a company may be considered non-resident for SDLT purposes.

Key Concepts

SDLT: Stamp Duty Land Tax, a tax charged on property purchases in England and Northern Ireland.
Non-Resident: A company that does not meet specific residency conditions set by HMRC.
Close Company: A company controlled by a small number of people, generally seen as owner-managed.
Relevant Participator: A person or entity with a significant stake in the company that can influence its decisions.

Increased Rates for Non-Resident Transactions

The SDLT rates increase if a buyer is a non-resident. To determine if a company is classified as non-resident, one must consider various criteria regarding its ownership and control. The primary focus will be on whether the conditions set out in the legislation at paragraph 7(3) are met.

Example 1: Black Starling Ltd

Esther and Dahlia both hold 50% of the shares in Black Starling Ltd. This company qualifies as a UK resident for Corporation Tax purposes and is not excluded under paragraph 11.

On 1 February 2025, Black Starling Ltd purchases a freehold residential property in England for £465,000. To check if Black Starling Ltd is non-resident for this transaction, we examine the second condition in paragraph 7(3).

Is Black Starling Ltd a Close Company?

Yes, because control lies with two participators, it is deemed a close company.

Determining Non-UK Control Test

Now, we consider whether the owners, Esther and Dahlia, are relevant participators according to the residence test outlined in paragraph 5(1). Over the past year:

Esther was in the UK for 185 days, making her a UK resident for the transaction, thus she is not a relevant participator.
Dahlia spent 38 days in the UK, indicating she is non-resident and a relevant participator.

Since Dahlia controls only 50% of the share capital, she does not have enough control over Black Starling Ltd. Therefore, the company is not controlled by relevant participators, and the non-UK control test is not satisfied, meaning the purchase is not subject to the surcharge.

Example 2: Mystic Orleans Ltd

Mystic Orleans Ltd is another example of a UK resident company that is not excluded. On 1 February 2025, it buys a freehold residential property in Northern Ireland for £900,000.

Assessing if Mystic Orleans Ltd is a Close Company

The share capital distribution is as follows:

40% owned by Black Starling Ltd
40% owned by Atlantic Pack Ltd
20% owned by Volterra Forks Ltd

This ownership confirms that Mystic Orleans Ltd is also a close company since control is shared among multiple participators.

Non-UK Control Test Consideration

We previously determined that Black Starling Ltd is not a relevant participator for the current transaction. We will now evaluate Atlantic Pack Ltd and Volterra Forks Ltd.

Atlantic Pack Ltd Evaluation

The share distribution is:

Equally shared between Ansel, Mohammed, and Jackson.

Between the same dates as before, their UK residence days are:

Ansel: 187 days – UK resident
Mohammed: 93 days – non-resident
Jackson: 105 days – non-resident

Here, Mohammed and Jackson control Atlantic Pack Ltd, which is thus under non-resident control, making it a relevant participator for our analysis.

Volterra Forks Ltd Evaluation

Owned by siblings Krishna and Aadhya, each holding 50%:

Krishna: 275 days – UK resident
Aadhya: 105 days – non-resident

Since siblings are associates under close company rules, Krishna’s stake is attributed to Aadhya, indicating that Volterra Forks Ltd is also controlled by non-residents. This company qualifies as a relevant participator too.

As both Atlantic Pack Ltd and Volterra Forks Ltd control Mystic Orleans Ltd, the latter satisfies the conditions to be classified as a non-resident company for the transaction.

Example 3: Amoury Sucre Ltd

Amoury Sucre Ltd is a UK resident company making a property purchase on 1 February 2025, spending £700,000 to acquire a freehold residential property in England.

Checking for Close Company Status

The ownership is distributed as:

50% – Tawanda PLC
25% – Black Starling Ltd
25% – Sipsey Ltd

Amoury Sucre Ltd thus qualifies as a close company.

Review of Non-UK Control Test

We already assessed that Black Starling Ltd does not meet the criteria. Now we look at the other participators:

Tawanda PLC Examination

Tawanda PLC has a shareholding structure where:

Imogen holds 60% while 40% is held by the public.

As a quoted company, it should not typically be treated as a close company. However, for SDLT surcharge purposes, Tawanda PLC is indeed a close company.

Between the evaluation period, Imogen was only in the UK for 77 days, thus being classified as non-resident, making Tawanda PLC compliant with the non-UK control test here.

Sipsey Ltd Examination

Ruth and Buddy each own 50% of Sipsey Ltd, making it a close company. Their respective UK presence showed:

Ruth: 190 days – UK resident
Buddy: 87 days – non-resident

While Ruth and Buddy are spouses and associates, the rules allow Ruth’s rights to stand alone regarding the non-UK control test, preparing the company to not meet the criteria.

Consequently, with Tawanda PLC being the only relevant participator and lacking control on its own, Amoury Sucre Ltd fails to meet the non-UK control test, thereby not triggering the SDLT surcharge on this purchase.

Example 4: Gemini Kai Ltd

Gemini Kai Ltd is assessed for a transaction involving £2.2 million for a residential property in England, made on 25 July 2023. This company is also a UK resident and not excluded