Is now the time to buy, buy, buy? SDLT Surcharge for Non-Residents

Our team: Gemma Grunewald

The Government’s election promise to introduce a Stamp Duty Land Tax (SDLT) surcharge for non-resident purchasers will shortly take effect. From 1 April 2021, non-residents will be liable to an additional 2% SDLT on purchases of residential property in England and Northern Ireland. This surcharge will be payable in addition to existing SDLT liabilities, including on top of the 3% surcharge for additional homes. This means that purchasers of high-value homes could face a top rate SDLT charge of 17%. The global pandemic has certainly stunted growth in some sectors, but perhaps now is the optimum time for non-residents to invest in residential property.

Who is non-resident?

For the purposes of the 2% SDLT surcharge, the definition of “non-resident” will depend on the type of purchaser.

Individuals should generally not be subject to the 2% surcharge if they spend at least 183 days in the UK during a continuous 365-day period beginning 364 days before the effective date of the transaction and ending 365 days after it. A slightly modified test applies to individuals acting as part of a partnership or as trustees, and special rules apply where spouses or civil partners are joint purchasers in relation to a transaction. The slightly surprising (and perhaps somewhat perverse) result of this residency test is that, in some cases, an individual may be treated as UK resident for the purposes of UK income and capital gains tax, but still subject to the SDLT non-resident surcharge.

Corporate purchasers will be subject to the 2% surcharge if, on the effective date of the transaction, the company is not UK resident for the purposes of UK corporation tax. In addition, a UK tax resident company can be liable for the 2% surcharge if it is a “close” company and is controlled by non-resident participators. A corporate veil is therefore unlikely to mitigate the new SDLT surcharge if that company is ultimately controlled by non-resident entities.

Of note, the rules also classify partnerships as non-resident if a single partner is non-resident. In such a case, the surcharge will apply to the entire chargeable consideration, regardless of the size of the interest of the non-resident partner. This could have a significant impact on purchases by partnerships where a limited partner (with a minor interest) may be outside of the UK.

Are any reliefs available to mitigate the SDLT surcharge?

Similar to the second homes SDLT surcharge that was introduced in 2016, where the 2% surcharge is paid, but within 2 years of the effective date of the transaction the individual becomes UK resident, a claim for relief and refund of the surcharge can be made.

Under current legislation, where six or more separate residential properties are acquired under a single transaction, the purchaser can treat the transaction as non-residential and within the mixed-use SDLT rates of SDLT. As an alternative, a purchaser can claim Multiple Dwellings Relief (MDR) in order to manage its SDLT liability. With the introduction of the new surcharge, MDR claims are likely to become less popular because each of the residential rates of SDLT will effectively increase by 5% (i.e. 2% surcharge for non-resident purchasers plus 3% for additional homes). Where at least six dwellings are purchased, use of the mixed-use SDLT rates will be far more cost effective.

In addition, sub-sale relief seems unaffected by the new 2% surcharge. This means that if a non-resident purchases residential property off-plan and subsequently flips this onto a UK resident, no surcharge should be payable because the non-resident would obtain sub-sale relief from SDLT.


The Government hopes that the new surcharge will provide revenue to combat rough sleeping, whilst also, at least in the long-term help deflate property prices so that more people can move up the housing ladder.  However, in a property market already wracked by the effects of Brexit and COVID-19, the question remains as to whether the new surcharge will simply make the market less attractive to overseas investment and stunt it further.

For further information or if you have any questions, please contact a member of the Tax team.

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