A new surcharge for Stamp Duty Land Tax (SDLT) has been in force since 1 April 2021 for buyers of residential property in England and Northern Ireland who are not UK residents. It adds 2% of SDLT to all rates of SDLT payable on the purchase of residential property.
What if I become UK resident?
Where an individual is non-resident at completion, but might become UK resident during the one year after completion, the SDLT Return must be submitted on the basis the transaction is a non-resident transaction (i.e. the 2% surcharge must be paid). If the individual becomes UK resident after the SDLT return has been submitted during the one year period after completion, the purchaser has a further year during which they can amend their return.
The following case study illustrates a practical example of how the rules work since the residence of an individual is not decided by reference to the normal UK Statutory Residence Test Rules used for Income and Capital Gains Tax purposes, or by reference to nationality, visa or “right to reside” rights.
With respect to the surcharge, an individual will be treated as UK resident if they have been in the UK for at least 183 days in any continuous period of 365 days following within the two year window beginning 364 days before the purchase and ending 365 days after it. The day count will include any day when the individual is in the UK at midnight.
Overview and commentary
Jane completed on the purchase of a residential property in England on 19 April 2021 when she was tax resident in Dubai. She was regarded as a non-UK resident for the purposes of the SRT for the tax year 2020/2021. On the basis she spent 68 days here between December 2020 and February 2021 once she has spent another 115 days here she will be able to apply for a refund having spent 183 days here. The days do not need to be consecutive.
So in this case the time period during which Jane may amend her SDLT return is extended for her non-resident transaction once she met the UK residence condition and had spent the requisite 183 days here. An individual is present in the UK if that individual is present in the UK at the end of that day.
The purchaser does not need to send the contract for the transaction with their amended return. This is usually required when an amendment to a return results in a repayment to the purchaser.
Individuals acquiring residential property may need to obtain and retain evidence to verify their residence status, such as flight tickets and original boarding passes. HMRC guidance indicates they will take a pragmatic approach and that they understand that buyers may not have kept contemporaneous records of their location on a day to day basis. They will consider credit and bank statements that indicate the place of a buyer’s day to day expenditure and membership and usage of clubs.