February 13th, 2019 / Insight posted in Articles

Property Alert – Proposed 1% SDLT surcharge for non-UK residents – HMRC consultation opened

HMRC has opened a consultation seeking views on the government’s proposed 1% SDLT surcharge for acquisitions of freehold and leasehold residential property in England and Northern Ireland by non-UK residents. It applies to both individuals and ‘non-natural’ persons (broadly, companies, partnerships and trusts).

A simplified residence test is proposed, with the surcharge applying to individuals who have spent less than 183 days in the UK in the 12 months prior to acquiring a residential property. However, so as not to discourage non-UK residents from moving to the UK, the surcharge will be repaid in the event that the 183-day limit is exceeded in the subsequent 12 months. It will also apply to both non-UK resident companies and UK resident close companies under the direct or indirect control of one or more non-UK resident persons.

To avoid purchasers having to take professional advice regarding the surcharge, it is intended to be aligned as closely as possible with existing legislation. As such, in most cases, the additional 1% SDLT will simply be imposed onto whichever existing SDLT rate or relief would otherwise be applicable. This might be first-time buyers’ relief, the higher rates for additional dwellings or the 15% flat rate applicable to companies.

Our view is that the 1% increase is unlikely to change purchasing behaviour such that there would be a material impact on house price inflation and a corresponding increase in affordable homes available for UK resident buyers. While the proposals could be interpreted as sending a negative message to potential overseas investors, it remains to be seen whether they will be effective in generating the significant additional revenue required to build new homes and address social issues such as homelessness, in line with the government’s stated intentions.

Responses are sought to the consultation by 6 May.

Here to help

If any of this raises concern or you would like to speak to a property industry expert, please contact your partner at Kingston Smith or a member of our property team who will be happy to help.