Since 1 April 2021, any non-UK resident purchasing UK residential property are liable to a 2% surcharge where the property is located in England or Northern Ireland, and cost more than £40,000. This applies to both individuals and companies.

The definition of “non-UK resident” for the purposes of the surcharge has a different meaning than for income tax and CGT, both of which are determined by the statutory residence test (SRT). For SDLT purposes, an individual will be non-UK resident if they were not present in the UK for at least 183 days in the 12 months prior to the purchase. It is therefore a relatively simple test compared to the SRT, but the discrepancy between the two definitions could mean that an individual that is UK resident under the SRT is treated as non-UK resident for the purposes of SDLT.

Example. Clive has lived in South Africa all his life. On 1 May 2021 he moved to the UK to take up an offer of employment. He purchases a house and the transaction completes on 1 July 2021. Clive will clearly be UK resident for 2021/22. However, because he has only been in the UK for two months in the 12 months prior to the purchase he will have to pay the SDLT surcharge.

The good news for people in Clive’s position is that they will be able to claim a refund of the surcharge if they are present in the UK for at least 183 days in any continuous 365-day period starting one year before the purchase and ending one year after. In Clive’s example, he will be able to claim a refund in November 2021.

Companies will be non-UK resident (or deemed non-UK resident) if either of the following two conditions are met at the date of purchase:

• the company is non-UK resident for the purposes of the Corporation Tax Acts, i.e. not subject to UK corporation tax; or
• the company is resident in the UK, e.g. because it was incorporated here, but: – it is a close company; and
• it meets the non-UK control test (see below); and
• the transaction is not an excluded transaction, e.g. by an OEIC.

The non-UK control test will be met if a participator controls the company, or is attributed with controlling the company, and they personally meet the non-UK resident test for individuals, i.e. they are not present in the UK on at least 183 days in the 12 months prior to the purchase.

It is important to note that the surcharge is in addition to any of the normal rates of SDLT. If the purchase is of a second (or subsequent) residential property, the 3% surcharge will be payable as well as the new 2% surcharge. The top right of SDLT may therefore be 17% in some circumstances.

There is a break for married couples and civil partners. If the property is held jointly, the new surcharge will not apply as long as one buyer relationship meets the UK resident criteria.