Policy paper

New rates of Stamp Duty Land Tax for non-UK residents from 1 April 2021

Published 21 July 2020

Who is likely to be affected

Non-UK resident purchasers of residential property in England and Northern Ireland together with conveyancers and other professionals who advise on such transactions.

General description of the measure

The measure introduces new rates of Stamp Duty Land Tax (SDLT) for purchasers of residential property in England and Northern Ireland who are not resident in the United Kingdom. The new rates will be 2 percentage points higher than those that apply to purchases made by UK residents, and will apply to purchases of both freehold and leasehold property as well as increasing SDLT payable on rents on the grant of a new lease.

Policy objective

Introducing the surcharge will help make house prices more affordable, helping people get onto and move up the housing ladder in line with wider objectives on homeownership. The revenue raised will be used to tackle rough sleeping.

Background to the measure

This measure was announced at Budget 2018 and a consultation ran from 11 February 2019 to 6 May 2019.

Detailed proposal

Operative date

This measure will apply to land transactions with an effective date of 1 April 2021 or later.

Where contracts are exchanged prior to 11 March 2020 but complete or are substantially performed on or after 1 April 2021, transitional rules may apply.

Transitional rules may also apply where a contract is substantially performed on or before 31 March 2021 but does not complete until 1 April 2021 or later.

Current law

Part 4 of the Finance Act (FA) 2003 contains the main charging provisions relating to SDLT.

Section 55 FA 2003 sets out the amount of tax chargeable on a transaction.

Section 74(1A) FA 2003 sets out the amount of tax chargeable where there is an exercise of collective rights by tenants of flats.

Schedule 4ZA FA 2003 provides for a higher rate of SDLT to be charged on dwellings purchased by companies and on additional dwellings purchased by individuals, partnerships or trusts.

Schedule 4A FA 2003 provides for a 15% higher rate of SDLT to be charged on dwellings worth more than £500,000 that are acquired by companies.

Schedule 5 FA 2003 sets out the amount of tax chargeable on the rental element of a newly granted lease.

Schedule 6ZA FA 2003 provides for special rates of tax to be charged in respect of purchases of dwellings made by first time buyers.

From 8 July 2020 the SDLT nil rate band for residential properties, at which a purchaser does not pay any SDLT, was temporarily increased until 31 March 2021. On 1 April 2021, SDLT rates will revert to their previous state. This has no impact on the changes made by this measure.

Proposed revisions

FA 2003 will be amended to introduce new section 75ZA which will provide for a 2% surcharge to be added to the rates of SDLT due on a residential property transaction, including those rates applied under:

• Section 55 FA 2003
• Section 74(1A) FA 2003
• Schedule 4ZA FA 2003
• Schedule 4A FA 2003
• Schedule 5 FA 2003
• Schedule 6ZA FA 2003

The requirements for the additional 2% charge to apply will be set out in new Schedule 9A of FA 2003.

• Part 1 of Schedule 9A sets out the arrangement of the Schedule
• Part 2 of Schedule 9A sets out the conditions for a transaction to be considered a non-resident transaction and so liable to the 2% surcharge
• Part 3 of Schedule 9A sets out the residence test for individuals, and special rules for crown employees
• Part 4 sets out the residence test for companies, including special rules which apply to certain UK resident companies under the direct or indirect control of non-UK resident persons
• Part 5 provides for special rules relating to particular purchasers and transactions. This includes rules relating to:
  • the residence status of spouses and civil partners
  • purchases of property made by certain bare trusts and by certain settlements
  • the residence status of co-ownership authorised contractual schemes and certain equivalent collective investment schemes
  • purchases as part of alternative property finance arrangements
  • the completion of contracts which have been previously substantially performed
• Part 6 contains provisions which:
  • set out the requirement to complete a land transaction return where the purchaser is, or includes an individual
  • permit individual purchases to amend their land transaction return where they become UK resident after the effective date of transaction
  • describes the type of property which will be subject to the surcharge

Summary of impacts

Exchequer impact (£ million)

2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023	2023 to 2024	2024 to 2025
-	+250	-355	+35	+105	+105

These figures are set out in Table 2.1 of Budget 2020 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2020.

Economic impact

This measure may help to control house price inflation, by leading to a reduction in residential property purchases by non-UK residents, some of which is offset by an increase in purchases by UK residents.

Impact on individuals, households and families

This measure will affect individuals who will be required to consider their residence status when purchasing a residential property. Most individuals will be clear as to their residence status for the purposes of SDLT but some individuals with more complex affairs or who have regular periods in and out of the UK may require additional advice and incur additional costs in determining their tax liability. Where individuals pay the surcharge but then satisfy the residence conditions in the 12 months following the transaction, they may be entitled to a refund.

Customer experience could be negatively impacted as this measure may create complexity for individuals in establishing the rate at which SDLT is payable on their property purchase. To support, we will produce guidance setting out how individuals can determine their residence status and whether they are entitled to claim a refund.

This measure may impact family formation, stability or breakdown by increasing upfront costs for some non-UK residents purchasing a home in England or Northern Ireland. It could affect customer decisions around the type and location of property purchased.

Equalities impacts

It is not anticipated that there will be impacts on groups sharing protected characteristics.

Impact on business including civil society organisations

This measure is expected to have a negligible impact on businesses who will be required to consider their residence status when purchasing a residential property in England or Northern Ireland. It is expected that this will be a straightforward task. For businesses with complex ownership structures, more time and extra costs may be involved in assessing their residence status. One-off costs include familiarisation with this change and will include businesses identifying their residence status in order to self-assess their SDLT liability. There are not expected to be any continuing costs.

Customer experience could be negatively impacted for businesses with complex ownership structures as it may be more difficult for them to establish the rate at which SDLT is payable on their property purchase. This measure is not expected to impact civil society organisations.

Operational impact (£ million) (HMRC or other)

HMRC will make changes to IT systems to implement this policy, with costs currently estimated at £2.71m. There will also be other resource costs of approximately £1.02m.

Other impacts

This measure will require the collection of personal data from purchasers. Other impacts have been considered and none has been identified.

Monitoring and evaluation

This measure will be monitored through information collected on land transactions returns and through communication with affected groups.

Further advice

If you have any questions about this change, please contact the HMRC Stamp Taxes team at stamptaxes.budgetfinancebill@hmrc.gov.uk.