A Brief Guide to ‘Non-Resident’ Stamp Duty Land Tax Surcharge

Partner Andrew Tress

Residential Property Partner Andrew Tress discusses the non-resident surcharge added to Stamp Duty Land Tax in April 2021.

What is the non-resident surcharge?

On 1 April 2021, a new surcharge was added to the increasingly complex Stamp duty Land Tax (“SDLT”) regime for ‘Non-Residents’ of the UK, which adds 2% of the purchase price of the property onto whatever SDLT payment would be due if they were a UK resident.

The surcharge applies if the buyer has not lived in the UK for more than half the year ending with completion of the purchase, but the definitions used and the specificity of these provisions can be complicated.

The surcharge applies to all ‘non-resident transactions’, even if you intend to live in the property you’re buying, and regardless of whether or not you already own a residential property.

How do they define having “lived in the UK”?

If any buyer has or will have spent 183 days or more outside the UK in the year ending with completion of the purchase, they are deemed to be non-resident. If they have, then the surcharge will be payable.

Nationality, citizenship or residence status under the UK Statutory Residence Test are not relevant in assessing whether this surcharge applies.

How do I prove where I’ve been living?

If HMRC were to query your residential status, things like hotel bills and travel tickets will likely be the first port of call. However, they may also want to look at bank statements, mobile phone bills, other bills (e.g. utility bills), work diaries or time sheets and so on. 

Are there any exceptions?

The first exception is marriage and civil partnership. If the marriage or civil partnership exists on the day of completion (and has not broken down), the spouse or civil partner of a UK resident will be treated as UK resident also. 

The second exception is employment by the Crown. A member of the Armed Forces, or some other Crown employee who must pay UK income tax even when working abroad, can claim Crown exemption from NRS, as can their spouse or civil partner.

The surcharge also does not apply where the consideration paid on the purchase is under £40,000 (unless it is a new lease where the rent is £1,000 or more, or will be in the future).

Can I claim it back?

It is possible to claim a refund of the 2% surcharge if, after the purchase, you are present in the UK for at least 183 days during any continuous 365-day period that falls within the 2 year period beginning 364 days before completion and ending 365 days after completion.

If the transaction has more than one buyer, refunds are only possible if all the buyers are individuals and satisfy this residence rule, although the continuous 365-day period can be different for each buyer. 

Any claim must be made within 2 years of completion and once the residence rule is satisfied.

Stamp Duty Land Tax continues to get more complex and tricky to navigate and it is important that these queries and issues are flushed out as early as possible so as to avoid any surprises down the line!

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