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International Tax

Another tax for non-resident property owners on the horizon!

Another tax for non-resident property owners on the horizon!
Amal Shah

By Amal Shah

01 Mar 2019

It comes as no surprise that there are even more changes in property taxes, especially aimed at foreigners, because of evidence that purchases of property by non-UK residents is pushing up house prices for UK residents, and follows the introduction of non-resident Capital Gains Tax (CGT) for residential property in 2015.

HMRC and the Treasury have issued a 12-week consultation on plans to introduce a Stamp Duty Land Tax (SDLT) for non-UK resident individuals and non-natural persons, including companies and trusts purchasing residential UK land and property.

As announced in the Autumn Budget, the government is proposing that a 1% surcharge is introduced, which will apply to all purchases on residential property including freehold and leasehold purchases. The date from which this new measure is to take effect and all other details are yet to be published.

This is not without precedent; Canada, Singapore and New Zealand have all introduced some kind of foreign purchaser restrictions already and New South Wales, Australia introduced a 4% surcharge purchaser duty on foreign buyers in 2016 which was raised to 8% last year.

It is not known yet whether there will be any exemptions from the charge, but overseas investors in student accommodation, care homes and others will be keenly watching this space.

The 42-page consultation document covers all aspects of the charge including how non-residents will be defined and how it applies to companies, however it is proposed that the new surcharge will:

  • Apply on top of the existing SDLT rates, including the additional dwelling surcharge (currently 3%) and 15% charge for high value properties which are subject to Annual Tax on Enveloped Dwellings (ATED)
  • Use rules that are as simple as possible to understand and apply
  • Exempt certain individuals – this includes crown employees working abroad i.e. military service personnel
  • Apply to residential property only, defined as ’dwellings’
  • Have special rules in place for joint purchasers and partnerships

The government has also proposed to refund the surcharge when an individual spends 183 days or more in the UK.
The government has decided not to use the Statutory Residence Test (“SRT”) to determine individual residency for the purposes of the surcharge and have instead proposed a separate, less complex test:

  • Individuals will be non-UK resident if they spent fewer than 183 days in the UK (not just England and Northern Ireland) in the 12 months ending with the date the transaction occurs.
      • Where an individual subject to the surcharge spends 183 days or more in the UK in the 12 months following the effective date of the transaction, they will be eligible for a refund.
  • Companies will be resident in the UK if they are incorporated in the UK, or their central management and control is in the UK, at the time they acquire the residential property.
  • Trusts will be subject to the existing trust residency rules.

The deadline for responding to the consultation is 6th May 2019 – watch this space! For more advice and support with cross border tax issues, please contact us.


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