SDLT Increased Rates for Non-Resident Co-ownership Authorised Contractual Schemes Explained

SDLT Non-Resident Surcharge and Co-Ownership Authorised Contractual Schemes

For SDLT, a co-ownership authorised contractual scheme (CoACS) is usually treated as UK resident when working out the non-resident surcharge. This means the residence of the investors does not normally decide the result. The main exception is certain EEA equivalent schemes treated as CoACSs under section 102A of the Finance Act 2003, which are treated as non-resident for this purpose.

• A CoACS is a collective investment scheme that is specially treated for SDLT as if it were a company, with investors’ interests treated like shares.
• The general rule is that a CoACS is treated as UK resident for the SDLT non-resident surcharge.
• Certain EEA equivalent schemes within section 102A Finance Act 2003 are treated as non-resident instead.
• The key question is the legal classification of the buyer under the SDLT rules, not where the investors, managers, or assets are located.
• In practice, you should first confirm whether the purchaser is a standard CoACS or falls within the section 102A exception.

Scroll down for the full analysis.

SDLT non-resident surcharge and co-ownership authorised contractual schemes

This page explains how the SDLT non-resident surcharge applies to co-ownership authorised contractual schemes, often called CoACSs. The point matters because the surcharge depends on whether the buyer is treated as UK resident or non-resident. For these schemes, the tax treatment does not simply follow the residence of the underlying investors.

What this rule is about

The source deals with a narrow but important question: when a purchaser is a CoACS, is it treated as UK resident or non-resident for the purposes of the SDLT surcharge on non-resident transactions?

A CoACS is a type of collective investment scheme. Broadly, assets are pooled, held by a depositary, and managed for investors under contractual arrangements. The SDLT legislation gives CoACSs a special treatment. For SDLT purposes, the scheme is treated as if it were a company, and the investors’ rights are treated as shares in that company.

That matters because the non-resident surcharge has its own residence rules. Paragraph 15 of Schedule 9A to Finance Act 2003 sets a specific rule for CoACSs rather than leaving the question to ordinary concepts of residence.

What the official source says

The HMRC manual says that, for the purposes of the surcharge, a CoACS is treated as UK resident. That is the general rule.

There is one stated exception. Certain collective investment schemes that are treated as CoACSs under section 102A of Finance Act 2003, described in the manual as EEA equivalent schemes, are treated as non-resident for surcharge purposes.

So the official position is:

• a CoACS is normally UK resident for the non-resident surcharge, and
• an EEA equivalent scheme falling within section 102A FA 2003 is instead treated as non-resident for this purpose.

What this means in practice

If land is acquired by a genuine UK CoACS, the scheme is not treated as non-resident merely because some or all of its investors are outside the UK. The legislation deems the CoACS itself to be UK resident for this surcharge test.

That can be a significant result. In ordinary language, a fund may have an international investor base, but for this particular SDLT question the residence of those investors is not the starting point. The special statutory rule for CoACSs is.

By contrast, if the purchaser is an EEA equivalent scheme that is treated as a CoACS under section 102A FA 2003, the source says it is treated as non-resident for the surcharge. In that case, the surcharge rules may apply on the basis that the buyer is non-resident, subject to the rest of the SDLT framework.

The practical question is therefore not just “who are the investors?” but “what type of scheme is the purchaser, and does it fall within the specific statutory exception?”

How to analyse it

A sensible way to approach the issue is:

• Identify the purchaser. Is the buyer a CoACS or another kind of fund or legal vehicle?
• Check the SDLT characterisation. The source states that a CoACS is treated as a company for SDLT purposes, with investors’ rights treated as shares.
• Apply the special residence rule in paragraph 15 of Schedule 9A FA 2003. The default position is that a CoACS is UK resident for the surcharge.
• Then test for the exception. Is the scheme one of the collective investment schemes treated as a CoACS under section 102A FA 2003, referred to as an EEA equivalent scheme?
• If yes, the source says it is non-resident for surcharge purposes. If no, the general UK-resident treatment applies.

In other words, the analysis turns on statutory classification of the scheme, not on a broad factual enquiry into where management, investors, or assets are located.

Example

Illustration: a UK property is bought by a CoACS authorised in the UK. The investors include pension funds and institutions from several countries. For the non-resident SDLT surcharge, the scheme is treated as UK resident under the special rule, so the overseas residence of investors does not by itself make the buyer non-resident.

Now change the facts. Suppose the buyer is a collective investment scheme that falls within section 102A FA 2003 and is treated as a CoACS as an EEA equivalent scheme. The source says that this type of scheme is treated as non-resident for surcharge purposes. In that case, the surcharge analysis proceeds on the basis that the buyer is non-resident.

Why this can be difficult in practice

The rule itself is short, but classification can be technical. A person dealing with a transaction must be confident about whether the buyer is:

• a CoACS within the ordinary rule, or
• an EEA equivalent scheme within the statutory exception.

That may require checking the legal status of the fund under the relevant investment funds legislation and the SDLT provisions that deem some schemes to be CoACSs. The source does not set out the full conditions for section 102A FA 2003, so the answer may depend on material outside this page.

Another possible source of confusion is that the manual says a CoACS is treated as a company for SDLT purposes. That does not mean it is a company for all legal or tax purposes. It is a specific SDLT treatment, and it should not be assumed to carry across into unrelated rules.

It is also easy to focus on the residence of the investors or fund managers. For this issue, that may be the wrong question if the legislation has already provided a deeming rule for the scheme itself.

Key takeaways

• A CoACS is generally treated as UK resident for the SDLT non-resident surcharge.
• The main exception mentioned in the source is for certain EEA equivalent schemes treated as CoACSs under section 102A FA 2003, which are treated as non-resident.
• The critical issue is the legal classification of the purchaser under the SDLT rules, not simply where the investors are based.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: SDLT Increased Rates for Non-Resident Co-ownership Authorised Contractual Schemes Explained

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