Non-resident buyers of UK residential property face double tax hit from April 2021

HMRC recently revealed draft rules for non-UK residents purchasing residential properties in England and Northern Ireland from 1 April 2021.

Next year’s increase follows the temporary Stamp Duty Land Tax (SDLT) cut which applies up to 31 March 2021, when the main rate of SDLT is cut to 0% on the first £500,000 of the purchase.

From 1 April 2021, all buyers will see the main rate reinstated, with non-residents paying a new 2% non-resident rate, and if the property in question is a second home or rental property then any buyer will face an additional 3% surcharge.

 

Who will be affected?

The changes will affect:

– an individual who is outside the UK for 183 out of the last 365 days;

– certain trustees;

– a company not resident in the UK; and

– UK resident close companies which are not controlled in the UK, for example they are owned by non-residents.

The 2% surcharge will not apply to joint purchases by spouses or civil partners “living together” where only one party is non-resident, as both will be treated UK resident for the purpose of the 2% rate.

 

What can you do?

If possible, buyers should manage their UK residency to achieve the 183 days in any 365 day period in which the date of purchase falls, these do not have to be consecutive days. Buyers who were already present in the UK for at least 183 days prior to the purchase can complete the SDLT return on the basis that the 2% surcharge does not apply.

If the residence test has not been met at the point of sale, the SDLT must be paid; but where the test is subsequently met (the individual then spends 183 days or more in the UK), the individual will have two years from the date of purchase to amend their SDLT return to reclaim the surcharge.

 

How we can help…

The reduced rate SDLT holiday until 31 March 2021 is an opportunity for buyers to consider whether it is worthwhile bringing forward a property purchase to take advantage of lower SDLT rates, this decision for non-resident buyers is more pertinent than ever.

For further details on the matter or advice tailored to your specific situation, please get in touch with your usual PM+M representative or Jonathan Cunningham using the button below.

For more information about anything in the above article, please get in touch using the button below.
Jonathan Cunningham
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